India, a key diesel buyer, was expected to slow or even stop diesel imports after June because of the planned start-up of the Reliance Petroleum's Jamnagar refinery, they said.

"There is no predicting how many cargoes IOC will buy but their July tender shows that they are not 100 per cent confident that Reliance will produce in the initial one or two months," one trader with an European oil major said.

"That's as much as we know." The forward Asian gas oil paper market has witnessed intense selling in the last two weeks, as many refiners sold ahead for the third quarter, in expectation that India would be absent from the import market and so intensify competition among export led refineries to find new sales outlets.

Asian gas oil prices rested athistorically low premiums to crude of 50 cents to $1.00 per barrel last week. But traders said IOC's tender, which called for first half July delivery of 0.25 per cent sulphur diesel, provided some assurances for the market. The IOC had expected to cease imports from July. "We need supplies for June. That is the only month left.

After June, we are likely to stop importing diesel," a IOC official said.Traders said IOC may have revised its import plan for diesel because much of it hinged on the smooth start up Reliance's Jamnagar refinery in the western state of Gujarat. The refinery's diesel output is expected to be 50 per cent of its 5,40,000 Barrels Per Day (BPD) production capacity.

"We hear that the start-up has been delayed into first half July or later, as crude can't be delivered," one trader with a Japanese oil company said. "Two VLCCs (Very Large Crude Carriers) are now stuck, unable to discharge due to SBM (Single Buoy Mooring) problems." Reliance officials said on May 5 that the commercialstart of half the refinery's production capacity was planned for June 14 or 15, with the second train starting in September. The first train would take some three months to bring up. Reliance officials could not be immediately reached for comment. Meanwhile, IOC has already chalked up 2.3 million tonnes of diesel on spot and term contracts for the three-month period from April to June 1999.

This nearly exhausts its 3.061 million tonnes of diesel imports penciled in under the Oil Economy Budget (OEB) for April 1999 to March 2000 year.

"Their demand has been growing stronger than expected at the start of the year," one trader with a US oil major said.

"They may have to revise up the import budget. I suspect they won't be able to stop importing, at least until the last quarter of the year."

In the 1998/1999 fiscal year, IOC had imported significantly higher volumes of more than 11 million tonnes of diesel.

Elections, due to be held in September or October, can also provide increased diesel demand,which could affect the country's forward planning.