A rally in Singapore diesel prices now appeared to be hitting blocks but fuel oil remained bullish, they said.

"Fundamentally, the (diesel) market is not so strong. It's artificial and if refiners can lock in margins, you will see them raising runs again soon," one trader with an oil major said.

Traders said that India's award over the weekend of only one 40,000 to 45,000 tonnes of diesel for November was a much less than had been expected, following bumper buys in the past few months.

Indian Oil Corp bought the cargo on a free-on-board (fob) Middle East basis from Kuwait Petroleum Corp (KPC) at 60 cents per barrel over MidEast quotes in a tender awarded late last Friday.

IOC had been expected to take up to nine cargoes for November and it was not unusual for them to issue several tenders a month tofulfill requirements, traders said.

"But the fact that there was some aggressive offers and they did not award more, means they didn't want it and don't need it," one trader said.

Sources have said that IOC appears to have overbought in August to October following a government order to stockpile, which now faced unexpected declining domestic demand.

Another key diesel buyer, China, starts a new clampdown on imports this week which revokes all outstanding diesel licenses, even to joint venture companies in the South, which had escaped China's earlier import ban in February, traders said.

"Imports are already low. No one's really sure what this extra ban means but I think we can forget about seeing China (buying) for the rest of the year," one trader said.

The trader's comment reflected those of an official from a Chinese oil trading company, who said during an industry gathering in Singapore last week that it was unlikely China would return before the year ends.

The outlook for fuel oil was morebullish, traders said.

The market appears to have tightened on the Singapore refinery run cuts and was expected to be short for the time being, traders said.

Shortages reported by South Korean refiners have sent China end users scurrying for suppliers in Singapore and pushed Singapore prices up accordingly, they said.

"China said they will need fuel oil imports despite renewing a ban on gas oil and gasoline this week," one Singapore trader said.

Traders said that on top of China, prompt demand from Indonesia was surging.

They said Indonesia state-owned Pertamina was seeking 1.5 million barrels of fuel oil for October, almost double September's 800,000 barrels committed.

The lighter end of the barrel meanwhile will track crude and western gasoline prices closely in face of more balanced fundamentals, traders said.

Despite expectations that region-wide poor naphtha and gasoline demand will continue, sellers will hold off on the refinery cutbacks, they said.