07 October 2010 08:10 [Source: ICIS news]
(Updates with traders comments in paragraph 3, 4, 11 and 24)
By Felicia Loo
SINGAPORE (ICIS)--Asia naphtha prices scaled up to a five-month peak on Thursday on the back of strong European prices and French port strikes, even as a supply deluge continues to dominate the region, market players said.
Second-half November naphtha contract was assessed at $751-754/tonne (€541-543/tonne) CFR (cost and freight) Japan on Thursday morning, up $2.50-5.00/tonne from Wednesday as crude futures raced to more than $83/bbl and were within sight of a five-month high, ICIS data showed.
Traders said naphtha prices may stay strong in weeks ahead if the crude continued its firming trend due to weakness in the US dollar and low stocks in the ?xml:namespace>
"Despite weak fundamentals, naphtha prices are rising. Flat prices are subject to crude and if crude prices were to rise the next two months during peak winter distillate demand, I won't be surprised to see higher naphtha prices," one trader said.
Naphtha last hit the strongest levels on 10 May, when prices were pegged at $758-760/tonne CFR Japan, according to ICIS.
“It’s all Europe-led,” said a trader, referring to the surge in
The French port strikes could seriously affect some chemicals production and global availability if they carry on for much longer.
Earlier on Wednesday, at the Fos-Lavera oil terminal in southern
It was unclear how long was too long, but market players from a variety of industries were warily watching the progress of the 10-day strike, which sources were now speculating could last until the end of the next general strike on 12 October.
"It doesn't make sense for
An armada of Middle East flows was heading to Asia, with half a million tonnes expected to land in October in addition to ample exports from India, which were estimated at 800,000-900,000 tonnes, traders said.
But, on the other hand,
Hammering the market further, oil major Shell has been selling down physical naphtha in open market trading. It sold 300,000 tonnes of the product since mid-September, traders said.
“They (Shell) have been relentless,” the trader added.
Underscoring a glut, Kuwait Petroleum Corp reduced its term naphtha offer to a premium of $13/tonne to
Even as outright naphtha prices climbed higher, the weak fundamentals were reflected in a widening contango and shrinking crack spreads in
According to ICIS, the spread between second-half November and second-half December contracts widened to a contango of minus $1.25/tonne from minus 50 cents/tonne last week.
Naphtha crack spread versus Brent crude futures weakened to $113.83/tonne on Wednesday’s close from 115.18/tonne on Tuesday.
"Naphtha is long on supply in
However, naphtha could seek solace from a firmly closed arbitrage window from Europe where prices were unusually higher than
($1 = €0.72)
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