01 June 2012 09:51 [Source: ICIS news]
By Ong Sheau Ling
Prices headed south soon after the news of an unplanned cracker shutdown by a major naphtha buyer hit the market on Thursday and naphtha nosedived to its 18-month low.
At 806 GMT, the open-spec naphtha was at $782-809/tonne (€633-655/tonne) CFR (cost and freight) Japan for second half of July, with July Brent at $107.32/bbl on 31 May and the July crack spread at $26.60/tonne.
The news about
“This is a major decision that the FPCC has taken. This shows how bad the downstream demand is,” a South Korean cracker operator said.
FPCC, a major buyer, will skip spot naphtha purchases for loading in the second half of July, a source close to the company said.
“Looking at the margins, more crackers may reduce their run rates or even shut the plants. If so, supply will turn even longer,” a trader said.
However, YNCC may be still needs to buy spot first half of July loading cargoes, depending on the duration of the reduced operations, sources close to the company said.
According to market sources it is not just the regional naphtha supply in Asia that will turn long, arbitrage volumes from
“The weak prices in Europe will impact
Consequently, spot discussions by Asian cracker operators were muted.
“Until there is a clearer direction of how margins will perform, end-users will not be ready to buy,” another trader said.
“If we do see some price stability in the downstream products, perhaps buying appetite of the [cracker operators] will renew. However, in the long run, demand is still dependent on the macroeconomic situation,” a Singapore-based trader said.
Bearish market sentiment has also led to tender premiums to fall below $20/tonne, as compared with levels above $20/tonne last week.
State-owned Indian Oil Corp (IOC) has sold by tender 35,000 tonnes of naphtha to PetroChina at a premium of $18.75/tonne to the
However, premium offered by ADNOC on one-year term naphtha supplies for July 2012 to June 2013 were high at $26.00-27.50/tonne and the company has no intention of reducing its premium, given its limited volumes.
“It is hard to say whether [naphtha] prices will bottom out soon, but looking at the low crack [spread between naphtha and ICE Brent], this low pricing can’t last for too long,” another Singapore-based trader said.
($1 = €0.81)
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