However, demand remains more than two per cent lower than a year ago, the Paris-based agency said in its Monthly Oil Market Report, citing trade and indigenous Chinese production data.

Underlying oil demand in China remains weak because of flagging manufacturing output and energy use, resulting largely from weak export demand and declining consumer and investor confidence, the agency said.

Chinese demand is forecast to recover slowly through to the end of the year, the report said, with demand in 1999 as a whole rising 70,000 bpd or 1.7 per cent over 1998 levels.

The IEA added that its forecasts assumed planned taxes on gasoline and diesel would be implemented in the third quarter of the year and that remaining restrictions on product imports were lifted in the next few months.

Demand inDecember 1998 fell to its lowest since May 1997, the report said. The removal of a crude import ban at the end of 1998 led to an increase in January of 42,000 bpd in China's net oil imports to 590,000 bpd while crude output rose marginally, it said.

Crude exports fell by 220,000 bpd to 100,000 bpd in January, the lowest monthly export volume in several years, reflecting the government's policy of favouring domestic crude in the country's refineries.

Product imports fell by 40 per cent to 462,000 bpd while exports of products decreased by 60 per cent to 79,000 bpd, due partly to relatively large import and export volumes in the previous month.

Since the agricultural sector accounts for 40 per cent of China's diesel consumption, deliveries normally peak in March and April.

Ahead of the expected seasonal consumption peak, however, diesel imports were still negligible in January at 2,000 bpd as a result of the import ban, the report said.

After strong gains for most of 1998, LPG imports at 139,000 bpdshowed a decrease for the second successive month, due to an increase in domestic LPG production.

Indian demand rose five per cent to 1.98 million bpd in January, a smaller year-on-year increase than in December, but in line with a 12 month trend, the report said.

Naphtha sales were particularly strong, surging 17 per cent, reflecting feedstock demand from the petrochemical sector and the commissioning of a naphtha-fuelled plant in western India.

Demand was lower in all the leading east Asian countries in December, reflecting continuing economic crisis, the IEA said.

Indonesian demand was 910,000 bpd in December, down five per cent on the previous year. The decline was mainly due to weak diesel sales.

In Thailand, demand fell by almost five per cent year-on-year to 730,000 bpd in December. Demand in the Philippines fell by four per cent in December and by 6.5 per cent in the fourth quarter of 1998, the IEA said without elaborating.

Indian Oil issues tender to buy crude

The state-runIndian Oil Corp has issued a tender to buy crude oil for lifting in June, July and August, traders said on Friday.

India is seeking a variety of Middle East, West African and Asian crudes in the tender, which asks for crude for lifting in June to the end of August, traders said.

Offers must be placed by Wednesday and must be valid until Friday, they said.The latest tender is a deviation from India's usual practice of buying crudes for lifting in a single month.

IOC has recently been increasing the number of tenders it floats.

It issued a total of five tenders to buy May-loading crude oil.

The awards for the most recent tender for May crude are due to be made on Friday, but details were not immediately available.

Traders said they were not sure what India's motives might be for issuing a tender covering three months.