UAE’s Adnoc maintains term naphtha offer despite softer spot prices

01 June 2012 07:50  [Source: ICIS news]

SINGAPORE (ICIS)--The Abu Dhabi National Oil Company (Adnoc) stood by its offer of a $26.00-27.50/tonne premium for term naphtha supplies for July 2012 to June 2013, although spot prices have been on a downward trend in recent months, a company source said on Friday.

At midday on 1 June, open-spec naphtha prices were at $809.50-812.50/tonne CFR (cost & freight) Japan, marking an 18-month low, according to ICIS data.

The term contract is offered for three naphtha grades – splitter naphtha, low-sulphur naphtha and paraffinic naphtha  – on Adnoc’s pricing formula free on board (FOB).

Adnoc has further reduced its one-year contract for splitter naphtha by 400,000 tonnes from its initial estimation of 1.2m tonnes because of less feedstock condensate.   

“We know that the buyers are asking for lower premiums, but we will not adjust [our offer],” the company source said.

“The buyers have to see that this is a term contract for 12 months. Since we do not know how prices will be in the future, this premium maybe reasonable to them then. There is so much military attention in the Arab Gulf now. Because of this reason, we, in fact, should be asking for higher premium but we didn’t,” the source added.

A major buyer for paraffinic naphtha was reluctant to accept the $27.50/tonne premium, in view of further price slides in the spot market.

“Sentiment is weak and after Formosa [Petrochemical Corp] shut its largest cracker yesterday on poor demand, the market turned more bearish. Such a premium is too high to accept,” the buyer said.

“We will either not accept this term or reduce our quantities from 150,000 tonnes,” he added.

Both Adnoc and its buyers remain in negotiations for the one-year term contract, and the settlement date remains unclear.

The company may offer short-term naphtha supplies in the second half of this year, once its upstream condensate supply normalises, the company source said.

Adnoc previously concluded its term naphtha supplies for June 2011 to July 2012 at a $20.50-24.50/tonne premium to Adnoc’s pricing formula FOB.

($1 = €0.80)

By: Ong Sheau Ling
+65 6780 4359

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