27 May 1996 00:00 [Source: ACN]
Naphtha buyers were surprised by firmer prices last week despite the UN-Iraq agreement on 20 May. The agreement allows Iraq to export crude for the first time since sanctions were imposed in 1990.
Naphtha prices initially dropped sharply to US$180/tonne cfr Japan but then rebounded to US$184-185/tonne cfr, higher than before the announcement was made.
Buyers had expected the drop in prices to be sustained. They are now staying away from markets and hoping prices will stabilise at a lower level.
The reason for the rise is not clear. Naphtha markets may have already taken into account the impact of Iraqi exports as the talks lasted several months, one trader said. Markets had anticipated the agreement and prices actually fell day by day during the week leading up to the announcement, he added.
The agreement between the UN and Iraq allows for US$2bn of crude to be exported for an initial period of six months. This is equivalent to about 700 000 bbl/day, sources said. Opec officials will hold their next meeting on 5 June but players are unsure whether a cut in Opec production will follow.
Buyers may be unable to refrain from making purchases much longer, now that shutdowns are ending. Some have requirements for delivery in the first half of July.
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