India's Oct diesel exports likely to rise 20-30 percent on poor domestic demand


* Reliance to export nearly 1.7 million tonnes in October

* Essar Oil to export 300,000 tonnes in Oct; at least 63,000tonnes in Nov

* Domestic demand could improve in November for festivities By Jessica Jaganathan

SINGAPORE, Oct 12 (Reuters) - India's diesel exports forOctober are expected to increase by 20 to 30 percent fromprevious months as domestic demand remains poor due to thedelayed monsoon season and a weak economy, industry sources saidon Friday.

The country's biggest diesel exporter Reliance Industries

is expected to increase its monthly diesel exportsfrom its usual 1.4 to 1.5 million tonnes a month to nearly 1.7million tonnes in October, according to estimates given byseveral traders.

Private refiner Essar Oil is also shipping outabout 300,000 tonnes of diesel in October, its first exports intwo years, the traders added.

Mangalore Refinery and Petrochemicals Ltd willexport 120,000 tonnes in October, one-third higher than the sameperiod last year.

"The increase in (Indian) exports is mainly due to theslowdown in domestic demand due to the delayed monsoon and weakeconomy," an India-based trading source said.

Diesel, which accounts for a third of local fuel use, isused in the transport and agriculture industry in India. Heavymonsoon rains trim demand for diesel used to pump water fromwells for irrigation during the dry season.

India experienced a late revival of monsoon rains at the endof August, compared with the usual June-September period.

The global economic crisis is having an impact on dieseldemand in several countries around Asia, including India andChina where the fuel is used in the industrial sectors.

While India's industrial output rose modestly in August, itwas not enough to end a long slump in Asia's third largesteconomy, with growth rates having slid since February into aphase of stagnation.


Essar Oil on Friday also offered a diesel cargo for earlyNovember loading from Vadinar, which suggests that refinersexpect domestic demand in India to stay weak at least untilearly November.

The company supplies diesel mainly to public sector refinersand the rest to its retail network, though recent upgrades toits refinery have boosted diesel supply.

"It's very difficult to predict the demand for next month,some are expecting sales to pick up during the festival season,but it's really hard to say," a second Indian-based source said.

The festival and wedding season will start picking up inlate October and peak next month during Diwali and Dhanteras,when diesel demand for transport usage usually rises onincreased travelling.

Demand from Indian state-owned companies could also increaseslightly in November, as Bharat Petroleum Corp isexpected to have a partial maintenance at its Kochi refinery,though the dates are not firm, traders said.

State-owned refiners have not imported any diesel sinceAugust due to the dip in domestic demand, they added.

According to latest statistics from the government'sPetroleum Planning and Analysis Cell, India exported 1.639million tonnes of diesel in August, up 4.8 percent from July's1.564 million tonnes.

The majority of the diesel exports are from Reliance whichare sent to Saudi Arabia and to Europe, while the rest are fromMRPL.

MRPL has a regular term contract with Mauritius where itships about 35,000 tonnes of diesel every month. It also offersabout 120,000 tonnes in the spot market.

October's exports are likely to hit at least 2 milliontonnes, according to traders' estimates.

(Editing by Miral Fahmy)

((Jessica.Jaganathan@thomsonreuters.com)(+65 6870 3822)(ReutersMessaging: jessica.jaganathan.thomsonreuters.com@reuters.net))