Sinopec, formally known as China Petroleum & Chemical (SNP), is making headlines for an impressive first half but shares are down anyway. With refining results effectively totally dependent on government fuel price mandates and other company results weakened, the market has reason to be less than impressed.

China Petroleum & Chemical Corp. [[SNP]] is down about 1% in midday trading yesterday after opening higher despite impressive mid-year results, fellow Chinese energy company PetroChina Co. [[PTR]] being up and the energy sector as a whole gaining. What is wrong with this picture?

China Petroleum & Chemical, better known as Sinopec, exceeded analysts’ expectations by more than 20%, posting about $4.9 billion in profit for the first six months of the year largely thanks to China’s easing of strict control of domestic fuel prices.

Unfortunately, China’s government has since lowered the price of petroleum and diesel – which is especially bad for Sinopec given that other operating revenue and income fell by 30% from a year ago. In other words, refining fuel for domestic use was the bright spot for Sinopec thanks to higher prices, but those prices are at the whim of the government, leaving concerns about the second half of 2009.

Sinopec is optimistic however: “Looking into the second half of this year, the state will continue applying proactive fiscal policy and relatively easy monetary policy…increasing domestic demand [for fuel].” Also, the company notes crude oil prices are expected to rise internationally in the second half of the year.

The market seems skeptical though.

China Mobile (CHL) and China Petroleum & Chemical Corp. (SNP) are the top Chinese movers of the day by market capitalization, though shares of these giants in moved in opposite directions.

China Mobile Ltd. [[CHL]] gained more than $4.37 billion in market capitalization Friday as shares gained 1.94%. Shares of China’s largest cellphone company moved on news that its new online application store, Mobile Market, would go live this month.

China Petroleum & Chemical Corp. [[SNP]] lost more than $2.31 billion in market capitalization Friday as shares lost 2.95%. The company better known as Sinopec was particularly hard hit on a day that was generally bad for energy companies. The energy sector lost 0.28% of its value with PetroChina Company Ltd. [[PTR]] and CNOOC Ltd. [[CEO]] also down.

PetroChina (PTR) was today’s top Chinese mover, losing significant value, but it had good company with Chinese Petroleum & Chemical (SNP) and CNOOC Limited (CEO) also dropping.

PetroChina Company Ltd. [[PTR]] lost $9.3 billion in market value today it today’s top loser by market capitalization. Though the energy sector was down generally today, Chinese refiners were particularly hard hit due to China’s cut of fuel prices.

The Chinese government totally controls gasoline and diesel prices, and in an unexpected move it cut prices by more than 3% – cut that comes almost directly from PetroChina’s margins. Fellow Chinese refiners China Petroleum & Chemical Corp. [[SNP]], more commonly known as Sinopec, and CNOOC Limited [[CEO][ also dropped significantly.

The markets had a strong day across almost all sectors, but Chinese oil and gas giant PetroChina (PTR) and the country’s leading insurer China Life Insurance Company (LFC) stood out with huge gains.

PetroChina Company Limited [[PTR]] shares surged more than 4.4% in normal trading today, adding some $9.2 billion in market capitalization to the Chinese oil and gas giant. The company rode a 2.77% gain in the energy sector as a whole. Competitor China Petroleum & Chemical Corp. [[SNP]] saw a 5.87% rise in its shares.

China Life Insurance Company Ltd. [[LFC]] gained more than 6.2% or $7.5 billion after on a strong day for the markets generally. China Life Insurance announced yesterday that it dominates the Chinese insurance market, taking in some 40.7% of its premiums.