16 July 2010 07:28 [Source: ICIS news]
By Felicia Loo
SINGAPORE (ICIS news)--Asian naphtha prices are likely to stay moribund for the rest of the year in the face of an armada of spot shipments from the Middle East and tepid demand, market sources said on Friday.
This would make naphtha the worst performing oil product across the barrel, they said.
On signs of poor market conditions, the price spread between first-half September and first-half October contracts sank to a contango of $7/tonne (€5.5/tonne) from a contango of $2/tonne early last week, while the naphtha crack spread against Brent crude futures plunged to a 13-month low of $60.20/tonne, ICIS data showed.
The deeper the contango, the worst the market gets. And there seemed to be no end of the tunnel and prices would face more downward pressure, sources said.
“Naphtha prices are freefalling. The market’s not getting any better, but worst,” said a naphtha trader in ?xml:namespace>
The market was reeling from the repercussions of a recent cracker outage in
“Spot demand from
The other buyers have the last laugh at this point, sources said.
“It’s a buyer’s market. There’s no doubt about it,” one source added.
The company last bought a bigger volume of 100,000 tonnes of spot open-spec naphtha for first half of August delivery, at discount levels of between $4.00-5.00/tonne to
Sellers are feeling the pinch, as evident in a string of tender sales from
For instance, Hindustan Petroleum Corp (HPCL) awarded its export tender for 25,000 tonnes of paraffinic naphtha at $3.50-5.00/tonne below
With prices on a freefall, the Middle East producers were heavily squeezed and were forced to reverse some arbitrage shipments to
The arbitrage economics, typically to move European naphtha to
Globally, Asian naphtha is the worst performing oil product, traders said.
“There are relentless exports from the
There has been a surge in spot Middle East shipments to
The upstream condensate market was hard hit by naphtha woes, with
Current high operating rates of reformers at regional petrochemical facilities was also expected to keep the Asian aromatics market oversupplied through the rest of the year, sources said.
A slowdown in Chinese economic growth in the second quarter signalled lower petrochemical demand from the world’s second-biggest energy consumer in the months ahead, they said.
“Petrochemical margins are poor and there is more downside than upside. There isn’t any rush in buying,” said a trader.
($1 = €0.78)
With additional reporting by Bohan Loh
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