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CHENNAI  - Indian Oil Corp Ltd's (IOC) refineries are operating at about 95% of their capacity, down from 100% at the same time last month, two sources familiar with the matter told Reuters.

Coronavirus cases have surged in India, leading to curbs on movement across the country, a move analysts say could hit fuel demand in the world's third largest oil importer and consumer.

An official at IOC, India's biggest oil refiner, said the cuts in runs at its refineries were "marginal" but analysts and industry officials say there could deeper reductions in output from the country's refineries in coming days.

"If cases continue to rise and curbs continue or intensify for a longer period, we may see cuts in refinery runs and lower demand after a month," an industry source said.

Consultancy FGE said it estimates gasoline demand will drop by 100,000 barrels per day (bpd) in April and by more than 170,000 bpd in May if further restrictions are imposed. India's total gasoline sales came to nearly 747,000 bpd in March.

Diesel demand is expected to contract by 220,000 bpd in April and by another 400,000 bpd in May, according to FGE.

India's diesel consumption, a key indicator linked to economic growth and which accounts for about 40% of overall refined fuel sales in India, was 1.75 million bpd in April.

While curbs to restrict movement are in place in many parts of India, it has not imposed a total shutdown as it did in March last year. Most businesses are still operating normally.

Gasoline and diesel sales by India's state fuel retailers in the first 21 days of April were higher than in 2020, industry data showed, mainly because of lower demand last year during the complete lockdown.

Diesel demand was lower compared with the same period of 2019, while gasoline demand was up 2%, the data showed.

FGE said it had cut its liquefied petroleum gas (LPG) consumption estimates for April and May marginally, with the delivery of LPG cylinders to households likely to be hit in the coming weeks with more lockdown announcements and travel curbs.

LPG sales by India's state retailers in the first three weeks of April fell 1.9% to 1.5 mln tonnes, the data showed.