Asian naphtha premiums in line with backwardation

24 June 2008 09:12  [Source: ICIS news]

SINGAPORE (ICIS news)--Asia naphtha premiums are now closer in line with the market’s backwardation, industry sources said on Tuesday.

“Due to the tightness of supplies, cargoes are now fetching higher premiums which are in line with the spreads. Unlike previously, suppliers have to sell at very low premiums which are not reflective of the market in order to attract buyers,” a source said.

The latest deal done early this week by Lotte Daesan was at a premium of $11/tonne to Japan quotes CFR (cost and freight) Korea for a 25,000 tonne open-spec naphtha cargo for delivery over the first half of August.

The backwardation between prompt months of first half of August and first half of September was now seen at $12.50/tonne, up by $2/tonne from the end of last week.

The premium is 88% of the backwardation compared with 60-80% early last week.

Early last week, two Korean end-users paid premiums of $3-4/tonne to Japan quotes CFR Korea for open-spec naphtha cargoes for delivery over the first half of August.

Backwardation between the first half of August and the first half of September was seen at $5/tonne early last week. It subsequently widened to $10.50/tonne at the end of the week.

A Japanese end-user also bought a 25,000 tonne open-spec naphtha cargo for delivery over the first half of August at the end of last week but the price was not known.

Early this month, the premium paid was around $4-4.50/tonne to Japan quotes CFR Korea for delivery in the second half of July. This is only 51.52% of the backwardation, seen at $8.25/tonne.

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By: Desmond Chia
+65 6780 4359

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