The agreement was signed during a visit by Nepali Prime Minister K.P. Sharma Oli to Beijing, following months of frosty relations with New Delhi, traditionally the sole supplier of fuel to landlocked Nepal.

"Both sides agreed to conclude a commercial deal on the supply of petroleum products from China to Nepal", the two countries said in a joint statement released in Beijing on Wednesday, without giving further details.

Nepal's acute dependence on India was underscored by a recent months-long border blockade by demonstrators from its Madhesi minority, who were protesting against a new constitution.

The slow movement of cargo at checkpoints where no protests were taking place prompted Kathmandu to accuse New Delhi, which has close links to the Madhesis, of imposing an "unofficial blockade", a charge India denied.

The blockade, which ended last month, sparked severe shortages of gas, medicines and other vital supplies and forced Nepal to turn to its only other neighbour, China for emergency fuel.

Officials in Kathmandu welcomed this week's deal but warned that Nepal's mountainous terrain would make it difficult to transport supplies between the two countries.

"This is a good start but there is a lot we still need to do in terms of road connectivity and infrastructure development... among other issues," said Sushil Bhattarai, acting deputy managing director at the state-run Nepal Oil Corp.

"It is not going to happen overnight," Bhattarai told AFP.

China has also agreed to build oil storage facilities for Nepal, the joint statement said.

In October Nepal signed a memorandum of understanding with China National United Oil Corp, its first ever fuel agreement with China, as the shortages led to overnight queues at gas stations.

Prime Minister Oli's visit to China comes a month after his trip to India - a traditional first overseas stop for Nepali premiers - to mend ties strained by the border blockade.