Smaller importers like Indonesia, Vietnam, Pakistan and Bangladesh may climb up the ranks of key buyers, as former giant demand centres like China and India close to imports, they said.

Gas oil or diesel, which makes up nearly 50 per cent of most Asian refiners' output, has been Asia's most active and profitable oil product market in the 1990s.

Export refiners, like those in Singapore, would rely on the importers to support their businesses. But with the loss of major importers, the gas oil market for the next two years threatens to go the same way of Asian gasoline -- towards oversupply.

"Today, nobody really looks at gas oil, it's a tough market. It's a difficult market to trade and make money," one trader with a Singapore-based oil company said.

"People have to be more creative and selective in taking positions in today's market, nobody dares to buy too much gas oil and store."

India, China close doors

India is expected to become self-sufficient in diesel production in the next year, with the addition of one million barrels-per-day (BPD) of refining capacity.

China's "temporary" ban on gas oil imports, which started in September 1998, appears to have become a permanent feature after the country successfully whipped its dormant refining sector into shape.

The two major markets had accounted for more than 60 per cent of the Asian export gas oil business, traders estimated. The shrinking demand deficit is already being felt in Singapore where the refiners have cut runs to minimise gas oil production. Some have even shut gas oil producing hydrocrackers, normally a lucrative part of refining.

However, even when put together -- Indonesia, Vietnam, Pakistan, Bangladesh, Nepal and Sri Lanka -- only just equal India's former import demand of 12 million tonnes per year, traders said. But small or not, exporters and traders need to develop a larger base of the niche buyers, traders said. "In this market we cannot be choosy any more, as long as they fulfill a good credit requirement," one Asian oil trader said.

The only clear Asian diesel buyer of reasonable size now is Indonesia, which imports up to 1,58,000 BPD.

But plagued by political and financial instability in the last two years, the giant of Southeast Asia has shown inconsistent import habits, traders said.