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 63,000 tonnes in Nov

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

SINGAPORE, Oct 12 (Reuters) - India's diesel exports for October are expected to increase by 20 to 30 percent from previous months as domestic demand remains poor due to the delayed monsoon season and a weak economy, industry sources said on Friday.

The country's biggest diesel exporter Reliance Industries

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

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

Mangalore Refinery and Petrochemicals Ltd will export 120,000 tonnes in October, one-third higher than the same period last year.

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

Diesel, which accounts for a third of local fuel use, is used in the transport and agriculture industry in India. Heavy monsoon rains trim demand for diesel used to pump water from wells for irrigation during the dry season.

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

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

While India's industrial output rose modestly in August, it was not enough to end a long slump in Asia's third largest economy, with growth rates having slid since February into a phase of stagnation.


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

The company supplies diesel mainly to public sector refiners and the rest to its retail network, though recent upgrades to its 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 in late October and peak next month during Diwali and Dhanteras, when diesel demand for transport usage usually rises on increased travelling.

Demand from Indian state-owned companies could also increase slightly in November, as Bharat Petroleum Corp is expected 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 since August due to the dip in domestic demand, they added.

According to latest statistics from the government's Petroleum Planning and Analysis Cell, India exported 1.639 million tonnes of diesel in August, up 4.8 percent from July's 1.564 million tonnes.

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

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

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

(Editing by Miral Fahmy)

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