Outages and poor demand hit global naphtha prices

30 April 2012 00:00  [Source: ICB]

Asian naphtha prices continue to soften as market participants react to news of an outage that occurred at South Korean refiner GS Caltex's 90,000 bbl/day naphtha splitter at Yeosu, which could remain shut for up to two weeks.

The outage means there will be more full-range naphtha available in the spot market. Adding to the bearish selling sentiment is the fact that cracker operators are able to continue cracking liquefied petroleum gas (LPG).

Taiwan's Formosa Petrochemical Corp (FPCC), Asia's largest naphtha buyer, said that it was not seeking spot naphtha cargoes in the coming weeks as it has ample LPG stocks.

Asian cracker operators are likely to remain sidelined over the coming weeks in the wake of softer crude prices and extremely weak downstream demand.

Declining European naphtha prices encouraged a cautious ­approach among buyers, who are opting to wait for further price declines. The movement of some players to alternative feedstock propane, because of the better margins on offer, continues to be a major factor in the limited naphtha demand. The market is described as balanced, with April volumes still available.

Energy prices

There are no opportunities to move European product west. However, opinion is mixed regarding arbitrage eastward. Some players say there are possibilities to move certain grades from Northwest Europe to Asia, and to move all grades from the Mediterranean to the same destination.

The US Gulf heavy naphtha market has seen an increase in buyers and offers. However, spot prices for heavy naphtha have continued to be mainly influenced by movement in gasoline futures on the NYMEX.

Shell, Marathon, CITGO, ExxonMobil and BP were all among the buyers for heavy naphtha. The five refining companies are normal buyers for naphtha as their crude units do not produce enough naphtha to run the reforming units at capacity.

Shell and Marathon were looking for heavy naphtha sellers on the Mississippi river to buy from. Their reforming units create alkylate, which is used at an increased percentage in summer gasoline blends.

The increase in buying caused a strengthening of the naphtha discount.

  • Additional reporting by Neha Popat in London

Author: Quintella Koh and Anna Matherne

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