Asia naphtha backwardation spreads widen by $4.25/tonne

10 August 2009 10:29  [Source: ICIS news]

SINGAPORE (ICIS news)--Asia naphtha backwardation spreads have widened by $4.25/tonne (€2.98/tonne) due to bullish sentiment in the region resulting from a lack of fresh cargoes fixed for northeast Asia in September, according to industry sources on Monday.

The closure of the west-to-east arbitrage window had capped any potential movements from the west, sources said.

High premiums in northwest Europe (NWE) and the Mediterranean had made procuring supplies in the west expensive. The surge in demand for naphtha from the gasoline market had consumed much of the supplies in Europe, further tightening availability in the western region, the sources added.

Spreads for the second half of September/second half of October in the cost and freight (CFR) Japan market closed at plus $5/tonne late on 7 August, compared with $0.75/tonne the previous week.

The spreads had been widening last week, picking up pace in the latter half of the week to plus $3.50/tonne, the sources said.

Likewise, spreads for the frst half of October/first half of November in the CFR Japan market were pegged last week at $4.75/tonne, up $3.25/tonne from the previous week.

“The prompt months backwardation spreads were widening much faster compared to the back months, showing how tight September availability in Asia has suddenly become,” a trader said.

Asian naphtha prices opened softer on Monday, with second-half September price indications pegged at $644.50-645.50/tonne CFR Japan.

($1 = €0.70)

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By: Desmond Chia
+65 6780 4359

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