Diesel imports in 2017 may rise to highest since at least 2011

India is a net exporter of diesel with production usually enough to meet demand, limiting imports

India's diesel imports this year may rise to the highest since at least 2011 as refiners shut down to upgrade their units to meet new fuel standards and as warmer temperatures spur demand, said five industry sources.

The imports have supported the Asian diesel market which would otherwise have collapsed under a flood of Chinese exports. The Singapore diesel crack margin rose to a more than two-month high of over $11 a barrel to Dubai crude on Friday, Reuters data showed.

India's state-owned refiners are already seeking or have bought up to 967,000 tonnes of diesel through July, according to tender data published by Reuters. That exceeds then-record imports of 962,000 tonnes in 2016, according to full-year government data going back to 2011.

The upgrades to meet new Euro IV fuel standards implemented on April 1 and warmer temperatures are boosting diesel imports into the world's third-largest oil consumer, said Sri Paravaikkarasu, head of East of Suez Oil for oil consultants FGE.

"Extreme temperatures in various states lifted (diesel) demand both in the agricultural and power sector in May," she told Reuters. "While there were downpours early this month, indicating early arrival of the monsoon, some states continue to face warm weather."

Heavy maintenance at Indian Oil Corp and Chennai Petroleum Corp Ltd as they upgrade units are also boosting diesel shipments, she said.

India's HPCL-Mittal Energy Ltd (HMEL), part owned by Hindustan Petroleum Corp Ltd, delayed the start-up of its Bathinda refinery in northern Punjab state by a fortnight to the end of this month. The plant had been shut for works that would increase its ability to produce cleaner diesel.

While monsoon rains typically reduce the need for diesel used in irrigation pumps, the curtailed supply because of the maintenance shutdowns will likely continue to boost imports into the country, FGE's Paravaikkarasu said.

India is a net exporter of diesel with its refinery production usually enough to meet domestic demand, limiting imports. But the change in fuel standards has boosted imports of cleaner diesel while it has exported more lower sulphur diesel, traders said.

India's diesel demand is expected to rise to record levels again this year as a slew of infrastructure projects boosts the use of the fuel, although a government-induced cash shortage will hold growth to its slowest in three years.

Diesel demand is expected to grow by 3 percent this year, lower than the 5.1 percent growth in 2016, FGE's Paravaikkarasu said.