19 August 2008 04:46 [Source: ICIS news]
SINGAPORE (ICIS news)--Asian naphtha contango spreads between the first half of October and first half of November have narrowed to $3/tonne on improving market sentiments, industry sources said on Tuesday.
In the Asian CFR (cost and freight) Japan market, the contango spreads between first half of October and first half of November, which widened to $6/tonne mid-August, had narrowed by $3/tonne early this week.
A supply glut from July to early August, coupled with lacklustre demand from northeast Asian end-users amid a spate of turnarounds and sufficient term supplies, had put the market under pressure.
Formosa Petrochemical Corp’s larger than expected purchase of 1m tonnes of term naphtha for delivery over October 2008 to March 2009 soaked up most Asian supplies.
The naphtha included a mixture of open spec and full range materials. The tender had originally sought up till 510,000 tonnes of naphtha.
The end-user subsequently emerged to snap up another 75,000 tonnes of spot naphtha for delivery over mid-October.
Supplies from Europe were however likely to be reduced until the end of this year. High freight costs were likely to slow down movement of arbitrage cargoes from northwest Europe to the Far East.
Freight costs of over $60/tonne had made it unfeasible to ship cargoes amid west-to-east differentials of $50-55/tonne.
Exports from India would also reduce from September due to turnarounds and increased domestic demand.
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