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India's Oil and Natural Gas Corp has for the first time sold oil through a three-month local tender, commanding $5-$8 per barrel more than existing rates under new rules that allow producers marketing freedom, industry sources said.

ONGC, the country's top oil explorer, accepted bids at that level through auction of light sweet oil from its western offshore field, including supplies from the country's flagship Mumbai High fields, they said.

In June India abolished a rule that said oil from blocks awarded prior to 1999 must be sold to government-nominated customers, mostly state refiners. That meant producers such as ONGC and Oil India often sold oil from those blocks at below market rates.

ONGC had offered 33 lots of 412,500 barrels each - 26 cargoes from Uran and seven cargoes from Mumbai offshore - for sale starting Nov. 1 at minimum 50-cent premium over the average monthly price of Brent, according to a tender document seen by Reuters.

Western offshore assets, including the Mumbai High fields, account for about 70% of ONGC's annual output of nearly 20 million tonnes, or roughly 400,000 bpd.

All the cargoes were sold to state refiners except one, which was awarded to Reliance Industries Ltd, sources said.

State refiner Hindustan Petroleum bought 15 cargoes; Mangalore Refinery and Petrochemicals bought five; and Bharat Petroleum Corp was the highest bidder for three, the sources said.

Indian Oil Corp, the country's top refiner, got one cargo while its subsidiary Chennai Petroleum Crop was awarded eight, the sources said.

Indian refiners bid to pay a premium of $1.80-$1.85 per barrel for cargoes from Uran, where supplies come through a pipeline, $3.8-$6.5 per barrel for offshore cargoes and about $1.55 per barrel for a parcel from Panna Mukta field, they said.

Uran cargoes fetch a lower premium as local levies make the crude costlier than offshore supplies.

Sources said ONGC hopes to get better participation in subsequent tenders.

None of the companies involved responded to Reuters' requests for comments.

India, the world's third-biggest oil importer and consumer, imports more than 85% of its oil, and bars crude exports.