Asia naphtha spreads narrow by $1.75/t on demand

06 June 2008 08:40  [Source: ICIS news]

SINGAPORE (ICIS news)--The Asian naphtha inter-month spread has narrowed $1.75/tonne as demand from northeast (NE) Asian end-users slows down, industry sources said on Friday.

During the week, the backwardation between second half of July and second half of August had widened by $4.25/tonne to $8.25/tonne. It subsequently narrowed  $1.75/tonne to $6.50/tonne on Friday.

The spreads between the first half of August and first half of September, which had widened by $4/tonne to $6.50/tonne over the same period, had since narrowed to $5/tonne.

Asian naphtha markets had been firming due to healthy buying interest from NE Asian end-users last week with South Korean end-users seen snapping up cargoes for delivery in July.

"They have mostly covered their requirements for July and will not be in the market soon," a source said.

The recent credit crisis at Projector had caused a sudden shortage of supplies in the market as the company failed to fulfil its commitments to end-users in NE Asia. The affected end-users were said to have resolved their problems.

Supplies had also been tightening, as there were fewer exports from India and Europe. No fresh arbitrage cargoes were seen slated for NE Asia despite the open west-east window and supplies were expected to remain tight for the rest of the year.

"The market will be likely in backwardation in the third quarter or maybe the fourth quarter of this year," another source added.

Asian naphtha prices were up 13.88% versus gains of 11.15% in the Brent crude markets since early May.

By: Desmond Chia
+65 6780 4359

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