China's oil demand in March increased by only 1.9 percent year-on-year to an average of 9.77 million barrels per day, to 41.31 million metric tons, which was the lowest since October, said the New York-based energy and metals information provider Platts on Thursday.

March oil demand dropped 4.2 percent from February. The figure was 9.76 million barrels per day last October. China's oil demand averaged 10.15 million barrels per day in the first quarter, up 3.5 percent year-on-year. In the last quarter in 2012, the country's oil demand grew 7.8 percent to an average of 10.28 million barrels per day, according to Platts.

The slower oil demand growth in the first three months was further evidence of China's slower-than-expected economic growth, said Song Yen Ling, Platts' senior writer for China.

China reported 7.7 percent GDP growth in the first quarter, which was below analyst estimates of 8 percent and down from 7.9 percent in the previous quarter.

The country's net oil imports in March were 480,000 tons, a 59.3 percent decline from February and a 74.2 percent decrease year-on-year, according to the General Administration of Customs.

Platts said the decline in net oil imports was caused by low seasonal demand, as China's refiners drew from inventories built up before the week-long Spring Festival holiday in February.

Diesel demand, an important indicator of industrial activity, remained sluggish in March, rising just 1.1 percent year-on-year to 14.39 million tons. China produced 14.79 million tons of diesel, up 4 percent year-on-year.

In recent years, China's diesel market has become more supply-oriented. China's net diesel exports in March reached 400,000 tons, the highest level in two years, said Platts.

China's diesel supply and demand had previously been well balanced, but the country has been a net exporter of diesel for nine consecutive months since July.

However, as China's auto sales grew 13 percent year-on-year in March, gasoline demand in the month was strong, reaching 7.8 million tons, up 18.4 percent year-on-year.

The authorities cut retail gasoline and diesel prices by around 400 yuan per ton starting from Thursday in order to better reflect market supply and demand.

However, the prices of these fuels in some wholesale markets have dropped by more than 400 yuan per ton, said Shanghai-based energy consultancy ICIS C1 Energy. By April 18, the capacity utilization of 35 major refineries in China was 80.8 percent, lower than the average level last year.