13 July 2012 12:01 [Source: ICIS news]
By Samuel Wong
SINGAPORE (ICIS)--Spot naphtha prices in Asian gained $18.00/tonne (€14.76/tonne) this week to a six-week high of $843.00-845.00/tonne at the close of trade on Friday, on strong demand from regional cracker operators amid concerns that supply might tighten in the near term, market sources said.
Over the past three weeks, naphtha values shot up by 21% or $146.50/tonne from a 21-month low on 22 June, according to ICIS.
But the gains may not be sustainable in the long-term given that demand for downstream petrochemicals is fundamentally weak, they said.
The open-spec Asian naphtha contract for the second half of August rose stood at $843.00-845.00/tonne CFR (cost & freight) ?xml:namespace>
The naphtha crack spread versus August Brent crude futures was also at a six-week high of $82.98/tonne, up 6.45% from the previous week, ICIS data showed.
The crack spread at $80/tonne levels is not very high, but it is at a “comfortable level”, a
Buying interest during this week has improved, supporting naphtha prices at higher levels, but this is only likely to remain in the short-term, a Singapore-based trader said.
There still remains much uncertainty in the market as it largely depends on the global macroeconomic situation and how soon demand in the downstream petrochemical markets would pick up, the trader said.
A number of market players are concerned that petrochemical margins will deteriorate once again if naphtha prices continued to rise at a more brisk pace compared with those of downstream products.
Even if demand for downstream petrochemicals were to strengthen, it will only be for a brief period, a South Korea-based cracker operator said.
On Friday, spot ethylene were quoted at $1,060-1,080/tonne CFR NE (northeast) Asia, compared with $1,040-1,060/tonne CFR NE Asia last week. Butadiene, on the other hand, was at above $2,400-2,500/tonne NE Asia on 13 July from last week’s levels of $2,300-2,400/tonne
BPCL also sold a similar-sized cargo of naphtha to trading firm Cargill for early-August loading from
State-owned Bangladesh Petroleum (BPC) sold by tender 170,000 barrels of naphtha loading from
In addition, the company bought a 25,000-tonne cargo for second-half August delivery to Yeosu, at a premium of $8.00/tonne to CFR Japan quotes. Two similar-sized cargoes for first-half September delivery to Yeosu and Daesan were bought at a $5.00/tonne premium and $5.50/tonne premium, respectively, based on a 45-day pricing formula.
Concerns about higher premiums and tighter supply in the weeks ahead have prompted buyers to purchase cargoes earlier, a Singapore-based trader said.
Physical demand for naphtha will increase, as some crackers are ramping up production to almost full rates, another Singapore-based trader said.
($1 = €0.82)
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