UpdateAsia to receive 600,000 tonnes of deep-sea naphtha in Dec/Jan

22 November 2010 07:03  [Source: ICIS news]

(adds state of naphtha market in paragraphs 8-13)

By Felicia Loo

SINGAPORE (ICIS)--Asia is set to receive some 600,000 tonnes of deep-sea naphtha supply from Europe in December and January, as a recent run-up in prices helped to make arbitrage economics workable, traders said on Monday.

For December, the volumes were expected to be 450,000 tonnes, and the remainder would be for January arrivals, they added.

“The arbitrage cargoes will prevent the market from overheating,” said a trader in Singapore.

Last week, the European naphtha cargo market traded within a range of $760-790/tonne (€555-578/tonne) CIF (cost, insurance and freight) NWE (northwest Europe), versus $796-806/tonne CFR (cost and freight) Japan in Asia, ICIS data showed.

Demand from end-users remained strong in Asia, traders said.

South Korea’s Honam Petrochemical snapped up 100,000 tonnes of spot naphtha for delivery in the second half of December, at a premium of $6/tonne to Japan quotes CFR, they added.

The prompt first-half January naphtha crack spread versus January ICE Brent crude was assessed at $156.03/tonne on 19 December, up from $150.13/tonne on the previous week, ICIS data showed.

Naphtha prices took a breather late last week, following news that Taiwan’s Formosa Petrochemical Corp might delay the delivery of 100,000-120,000 tonnes of naphtha to January from December, as its 1.03m tonne/year No 2 naphtha cracker in Mailiao did not start up smoothly after a regular turnaround.

Formosa easily snaps up 300,000 tonnes of spot naphtha each month, traders said.

Meanwhile, China's recent oil supply crunch had prompted Chinese trading firm Unipec to buy 150,000 tonnes of spot naphtha for delivery in the first half of December.

Unipec, an outfit of Asia’s top refiner Sinopec Corp, bought the cargoes on behalf of Sinopec-owned crackers.

Naphtha supply was being squeezed in China where domestic refineries were ramping up diesel output to plug a shortfall, traders said.

At midday, the intermonth spread between first-half January and first-half February naphtha contracts held at a firm $7/tonne in backwardation, versus $4/tonne two weeks ago and that signalled a still bullish market, traders said.

($1 = €0.73)

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By: Felicia Loo

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