India's diesel demand boosts rare imports of the fuel

[SINGAPORE] A rise in diesel demand is boosting India's rare imports of the industrial and transport fuel, helping to mop up some of the excess supply of the fuel in Asia, traders said on Wednesday.

Indian Oil Corp sought up to 80,000 tonnes of 40ppm sulphur diesel for delivery in late December, according to a tender document seen by Reuters.

The company seldom enters the spot market unless there is a spike in domestic demand or refinery maintenance that is curbing supply, traders said. "(IOC) is importing mainly due to demand being good," a source with an Indian refiner said, declining to be named as he was not authorised to speak with the media.

IOC did not immediately respond to Reuters on the matter.

India's fuel demand rose 12.1 per cent in November, compared with the same month last year, the latest data from the oil ministry's Petroleum Planning and Analysis Cell (PPAC) showed. Diesel sales jumped 10.5 per cent from a year ago. "The increase in diesel demand is seasonal but it looks to be stronger this year compared with last year," a second source based in India said.

India is taking over from China as the driver of global oil demand growth as its economy expands, boosting the use of diesel in vehicles.

IOC last imported diesel in May, when it was cheaper to buy from overseas rather than locally due to a withdrawal of discounts on taxes and shipping by private oil refiners.

But its imports ceased after that and IOC flipped to being an exporter of the fuel in October when operations at its Paradip refinery ramped up.

India overall last imported 503,000 tonnes of diesel in April and 222,000 tonnes of the fuel in May, according to data from PPAC that shows figures up to October.

Asia's third largest economy exported 2.7 million tonnes of the fuel in October, down from 2.8 million tonnes in September.

India's diesel exports are likely to reduce over the next few months as refiners try to meet the rise in domestic demand, traders said.

REUTERS