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India diesel buying hits the accelerator

SINGAPORE: Key Asian gas oil buyer India has imported more diesel than expected in its latest purchase tender for March, traders said on Monday.

It also surprised the market by issuing another tender to seek diesel deliveries for March, raising the prospect that its first quarter buying -- already as much as 855,000 tonnes, or 6.4 million barrels -- would continue.

In its latest tender, state-owned Indian Oil Corp (IOC) awarded up to 255,000 tonnes of diesel in seven cargoes for first half delivery.

"We were looking at seven to eight cargoes for the full month ... the buying was, therefore, more than expected," one trader with a Western oil company said, referring to the tender issued at the weekend for more diesel.

"India is giving ongoing support to the market, already we see some key Indian players bidding for gas oil."

FORCES PRICES HIGHER

Singapore gas oil swaps returned to more than $30.00 per barrel on Monday, after easing to $29.80/$29.90 late on Friday.

The market had surged nearly $2.00 on Friday to more than $30.00, a level not seen for at least 36-months.

India's sudden demand this year for diesel is exacerbating the Asian price effects of a squeeze on crude by the Organisation of the Petroleum Exporting Countries (OPEC), which has forced benchmark crude prices to nine-year highs.

These crude prices tend to set global oil prices trends.

Last week, traders had expected IOC to slow down its rate of imports after an earlier tender awarded fewer cargoes than had been expected.

Refinery problems sparked India's imports, traders said, but the problems had seemed under control.

FULL OF SURPRISES

So the issue of yet another tender surprised the market too, traders said.

"Further imports are expected until the first half of March," a key India industrial official had said on Friday.

India had become self-sufficient in diesel in November and December following the start-up of the 540,000 barrels-per-day (bpd) Reliance Petroleum refinery at Jamnagar, India's largest refinery.

The Reliance production allowed India to be self sufficient in diesel supply. Previously, it was one of Asia's biggest importers and a key support for the diesel market.

The industry official told Reuters on Friday that no diesel shortfall was expected from Reliance but other refineries were expected to lower throughput in coming months.

Mangalore Refinery and Petrochemicals Ltd (MRPL) planned to operate crude throughput at 350,000 tonnes per month (87,500 bpd) each month in February and March.

This was way below its capacity of 850,000 tonnes (212,500 bpd).

Meanwhile, IOC's 7.5 million tonnes-per-year (154,000 bpd) Mathura refinery would also be down for a month's maintenance from March 20, postponed from January.-Reuters