22 June 2012 06:27 [Source: ICIS news]
By Ong Sheau Ling
On mid-day, the open spec Asian naphtha contracts for the first half of August fell by $6.50/tonne from Thursday to $699.00-701.00/tonne CFR (cost & freight)
August WTI was up 45 cents/bbl at $78.65/bbl while ICE BRENT futures for August were up 65 cents/bbl to $89.88/bbl, on Friday mid-day.
The naphtha crack spread versus August Brent crude futures was assessed at $19.95/tonne on Thursday, down by $3.62/tonne from last Friday.
“The (naphtha) market is in a bad-shape now, we have no idea when it will recover?” a northeast Asian refiner said.
The spread between the naphtha contracts for the first half of August and the first half of September was assessed at a contango of minus $2.00/tonne on Thursday, while the inter-month spread between the naphtha contracts for the second half of August and the second half of September was assessed at a contango of minus $2.50/tonne, according to ICIS.
“A contango market shows how weak is the prompt market situation,” a Singapore-based trader said.
“On Wednesday, we were expecting that $730/tonne [CFR Japan] should be the bottom price, but after the news of
On 20 June, open spec Asian naphtha contract for the first half of August was assessed at $731.00-733.00/tonne CFR
"The slight bull run end of the last week as expected was short-lived," a South Korean trader said.
Prior to the mid-week change in the sentiment, some South Korean and southeast Asian cracker operators were out in the market seeking for spot cargoes, traders said.
The seller for this cargo – Petrochina, has a choice to offer full range naphtha or light naphtha, they added.
“There are many cargoes offered by AG (
Saudi Aramco has sold a total of 180,000 tonnes of spot naphtha for first half July loading over just these two weeks because of the leftovers from the unsold terms, a source close to the company said.
The source said that there will be more spot availability for first half of July loading.
Most Japanese cracker operators were uninterested to buy spot material for second half of July, while the largest spot buyer – FPCC is still absent from the market, traders said.
The uncertain restart date of FPCC’s crackers fuelled demand concerns, they added.
“Not just most buyers have now retreated to the sidelines, traders are holding back their cargoes,” another southeast Asian cracker operator said.
“Traders are caught by the high cost base,” he added.
Open spec Asian naphtha contracts have tumbled by close to $300/tonne or 27% from the peak of 10-month high at $1,100/tonne CFR Japan in early March, ICIS data showed.
Although some cracker operators agreed that product margins on paper were no longer negative, this was only in the condition that naphtha cargoes are bought at today’s level.
“The petrochemical prices may start slipping because of softer crude and naphtha. Then, this will keep product margins in the negative region,” a cracker operator said.
Ethylene margins based on naphtha feed in northeast
Besides the poor product margins curtailing spot appetite for naphtha, the active swing to LPG as a feedstock to crackers have reduced demand, industry players said.
It remains unclear whether crackers will ramp up for July, given the volatile crude and naphtha prices.
“The situation is just bad now,” a northeast Asian cracker operator said.
($1 = €0.80)
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