* Chinese demand to weigh on shortage of diesel in Asia
* Unipec, PetroChina to import 320,000 T in Nov, Dec
* Asian diesel margins seen strengthening through early 2012
By Jessica Jaganathan and Cho Mee-young
SINGAPORE/SEOUL, Nov 4 (Reuters) - China's top refiners have bought about 320,000 tonnes of diesel to cover domestic shortages of the power-generating fuel, traders said on Friday, rare purchases by the world's second largest economy that will squeeze an already tight market.
Chinese demand would likely buoy refinery margins for producing diesel into the early months of 2012, industry sources and analysts said.
"The market is very tight right now," a trading source based in Singapore said. "There is no oil left in North Asia for spot buying and everyone's competing for barrels. We are very short of barrels right now."
Traders and industry sources said Unipec, the trading arm of China's top refiner Sinopec Corp , and the second-largest refiner PetroChina had bought a combined 240,000 tonnes for November delivery and 80,000 tonnes for December delivery.
Unipec's purchases were the first in over a year and the two companies bought almost half their tonnage from South Korea's Hyundai Oilbank and S-Oil , industry sources with knowledge of the deals said.
The supply squeeze in China is expected to ease in December as Sinopec and PetroChina bring on line new crude refining units and as plants return from maintenance, traders said.
China had been expected to import diesel to alleviate a power shortfall through boosting electricity output at power plants and private diesel generators in factories.
Both of China's top state-owned oil companies have been ordered by local authorities to increase diesel distribution to areas urgently in need of the product.
Sinopec has curbed diesel exports for most of the year, but had not been in the international market for imports. Diesel is part of a group of products known as middle distillates.
The flow into China was expected to bolster the refining margin in Asia for producing middle distillates from crude - known as the gasoil crack - which is already at a three-month high of $19.44 a barrel above Dubai crude.
"The gasoil cracks are going to continue to increase through the end of the year and through early January," Analyst Victor Shum of energy consultancy Purvin & Gertz said.
Supplies in the Asian gasoil market are short due to Royal Dutch Shell 's 500,000-bpd refinery in Singapore operating at half its capacity after a fire in September.
Onshore diesel and jet stocks in the fuel trading hub fell about 4.5 percent to a nearly seven-month low of 10.577 million barrels as of Nov. 2, data from the International Enterprise showed.
Sources at South Korean refiners said their cargoes for November are mostly sold at premiums of over $2 a barrel to the country's benchmark price, more than double the almost $1 a barrel levels sold late last year.
Cash premiums for the benchmark 0.5 percent sulphur gasoil in Singapore, against which almost all other grades of diesel are priced, has reached the highest level since July 2008 at over $1.10 a barrel, Reuters data showed.
The gasoil crack spreads and premiums will likely continue to increase as the region gets deeper into the northern hemisphere winter, said Shum.
China's depleting diesel inventories are a result of reduced production at private refiners, which have slashed operations in the face of shrinking or negative margins. These plants make up some 20 percent of China's fuel supply.
The National Development and Reform Commission, the country's economic planner and price-setter, was reported to have asked state oil firms to beef up diesel supplies to meet a seasonal spike in demand.
But tight state controls over import permits, domestic pump prices that have not changed since April and a slew of other taxes on imports made shopping abroad barely profitable.
A trader based in China said the refiners' imports were a very small amount of the country's diesel consumption, and could be related to a possible change in the country's fuel pricing mechanism.
"If Sinopec (is importing) diesel, it's more about raising its bargaining power ahead of a possible change in China's fuel price mechanism," the trader said.
Unipec has bought about 200,000 tonnes of both 0.2 percent and 500 ppm sulphur gasoil in the spot market to import into mainland China, a source familiar with the matter said.
Traders in Singapore said that PetroChina has also bought about 200,000 tonnes of diesel for November. But this could not be confirmed and it is unclear if the volumes are for imports into the mainland or for deliveries elsewhere.
PetroChina imported 280,000 tonnes of diesel since July, 122 percent more than its whole diesel imports in 2010. Diesel imports in October stood at about 120,000 tonnes.
Latest customs figures show that China has imported about 1.44 million tonnes of light diesel fuel for the first eight months of this year, an increase of 44 percent from last year while its exports fell by 57 percent to 1.51 million tonnes.
The figures do not necessarily mean import of diesel for consumption, but could include bonded areas used for storage of the product for re-exports later.