Asia naphtha, aroms surge as crude hits $100/bbl

20 February 2008 04:47  [Source: ICIS news]

By Florence Tan

SINGAPORE (ICIS news)--Asia naphtha and aromatics surged around $20/tonne on Wednesday after crude oil topped $100/bbl (€68/bbl) overnight but the rise in energy values failed to stem falls in olefins caused by excess supply, producers and traders said.

Investors across Asia were also spooked by worries of high crude oil prices leading to inflation, causing stock indexes to fall around 1% in morning trade. Stocks for Sumitomo Chemical and LG Chem plunged by over 4%.

Crude oil soared briefly to $100.10/bbl on Tuesday in the US on fears that OPEC will not raise its output to cool prices during its 5 March meeting.

Fresh investors’ capital was also pumped into commodities, boosting prices. Trading cooled on Wednesday in Asia as US March crude futures fell $0.71/bbl to $99.30/bbl before noon.

Naphtha prices opened $19/tonne higher on Wednesday. First half April price indications were pegged at $908.00-911.00/tonne CFR (cost and freight) Japan and premiums doubled this week as supply tightened.

However, prices could ease in March when more arbitrage cargoes arrive, traders said.

Buy-sell indications for benzene rose $25-40/tonne to $1,100-1,130/tonne FOB (free on board) Korea in line with a $3.97-4.03/gal FOB HTC (Houston Texas City) rise in the US from Friday.

A benzene deal was heard concluded at $1,110/tonne FOB Korea for any April shipment, traders said.

Downstream styrene monomer (SM) also gained ground with selling indications up $20/tonne at $1,420/tonne FOB Korea for April parcels. Buying indications were reported around $1,400/tonne.

However, high crude prices failed to affect toluene prices as bids were elusive and offers were steady at $980/tonne FOB Korea for April cargoes.

It also could not prop up falling olefins prices as excess propylene and butadiene (BD) supply swept the market.

Propylene prices fell last week and may slip further as traders slashed offers to attract buyers.

Spot BD was off its record high of $1,900/tonne CFR northeast Asia in early February to around $1,800/tonne CFR for March loadings as buyers retreated from the market amid the arrival of about 40,000 tonnes of deep-sea cargoes from Europe and the US in the next two months.

“It will be difficult to stop the BD price falling even if crude was to be sustained around the $100/bb level,” he said.

Polyolefins traders in China said there was little reaction in the market as downstream plastics makers were still waiting for a clearer price direction before booking new cargoes.

“It is still unclear if the crude price will have any impact on the polyolefins market because it has been volatile and it may fall back down again,” a Chinese trader said in Mandarin.

However, some regional producers said polyolefins prices could increase or remain stable if crude prices continued to strengthen.

“With naphtha selling above $800/tonne CFR (cost and freight) Japan, polypropylene (PP) prices are likely to increase further,” a regional PP producer said.

The impact of high crude on the petrochemical market would depend on how long oil stays at $100/bbl and on naphtha supply, Samuel Lee, a JP Morgan chemical analyst, said.

“While oil prices were rising in October last year, naphtha did not move in line because of the availability of exports from India, he said.

When that volume dried up, naphtha started rising, he added.

“Higher oil prices are also a good excuse for petrochemical producers to raise prices and perhaps capture a little more margin,” Lee said.

Desmond Chia, Clive Ong, Kew Jia Hui, Helen Yan and Chow Bee Lin contributed to this article

By: Florence Tan
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