Indian Oil Corp Ltd (IOC) has bought 60,000 tonnes of diesel at the highest premium in more than six months as limited monsoon season rainfall keeps demand steady in India and amid tight supply in Asia, industry sources said on Friday. The monsoon season usually reduces diesel demand in India as a fuel for field irrigation pumps, but a drier monsoon season in June has kept demand steady, traders said.
But IOC's import requirements could slow in coming months if the monsoon rains increases. "Temperatures are cooling now, so at least diesel used for power generation will probably be reduced," said an India-based trading source. IOC paid a premium of about $7.50-$7.60 per barrel above its own formula to PetroChina Co Ltd for 60,000 tonnes of 320-parts-per-million sulphur diesel for July 29-31 delivery. This is about 4-5 percent higher than an early-July cargo it bought from Royal Dutch Shell Plc at a premium of about $7.20 per barrel. Diesel, which accounts for more than 40 percent of India's oil product demand, is also used for power generation and as a transport fuel in a country where car sales rose 30 percent in 2010/11.