India's privately owned Essar Oil has sold a diesel cargo for October lifting through a spot tender, in a rare export tender due to a slowdown in domestic demand, traders said on Friday.
Demand for diesel in India has been low due to monsoon rains and poorer economic outlook which has prompted the sell cargoes from Essar Oil, traders said.
Weak diesel demand in India follows a trend in China, where demand for the fuel has decreased due to slowing industrial activity amid a weaker global economic outlook.
As a result, diesel margins have slipped to a nearly two-week low as of Thursday, Reuters data showed.
In its latest tender, Essar Oil sold 65,000 to 70,000 tonnes of 500 ppm sulphur diesel for October 18-23 lifting to Japanese trader Itochu at a premium of $4.35-4.40 a barrel above Middle East quotes, traders said.
It last sold three cargoes of diesel to BP, Saudi Aramco and to Hess Energy at premiums between $4.60 to $4.75 a barrel to be lifted end September to early October, two more cargoes than it had initially offered through a tender, they added.
Prior to those sales, Essar Oil last exported diesel in October, 2010. Essar Oil supplies diesel mainly to Indian public sector refiners.
"India had a late monsoon this year, and on top of it the economic growth appears to be weaker as well so they might be having extra cargoes because of that," said an India-based source.
Economic growth in Asia's third largest economy slipped to 6.5 percent in 2011/12 fiscal year ending in March from an annual rate of 8.4 percent in the two previous fiscal years.
Essar Oil upgraded its refinery to process 405,000 barrels of oil a day, or about 9 percent of India's refining capacity, and raised complexity to handle cheaper heavy grades in June.
The refinery produces about 9-10 million tonnes of diesel a year and is able to produce Euro-V compliant fuel, sources said.
Most of this is sold to Indian state-owned refiners and the rest to Essar's retail network of 1,600 fuel pumps in India.
