FocusAsia naphtha prices seen stable post-wild crude swings

23 April 2013 07:00  [Source: ICIS news]

By Felicia Loo and James Dennis

Asia naphtha prices seen stable post-wild crude swingsSINGAPORE (ICIS)--Asia’s naphtha prices are expected to be largely stable following an unnerving and volatile trading in the previous week, which saw prices tumbling to nine-month lows, traders said on Tuesday.

With global crude oil futures picking up slightly after having fallen below $100/bbl (€77/bbl) last week, the trading fraternity adopts a largely cautious attitude amid ample supply and stable demand in the petrochemical feedstock market, they said.

Asia’s open-spec first-half June naphtha contract rose by $5.50-6.50/tonne to $841-844/tonne CFR (cost & freight) Japan on Tuesday, supported by overnight gains in Brent crude futures that pushed price above $100/bbl at the close of trade on Monday, according to ICIS data.

However, crude oil prices receded on Tuesday morning but stayed near $100/bbl, following release of downbeat manufacturing data from China. HSBC’s flash April purchasing managers' index (PMI) for China declined 1.1 points to 50.5 from March.

Naphtha prices slumped to $824-826/tonne CFR Japan on 16 April 2013, the lowest since 10 July 2012 when prices stood at $815-817/tonne CFR Japan, the data indicated.

“For now, naphtha shall stay stable for a while. There are no new factors added in,” said one trader.

Supplies will be ample because of abundant deep-sea material from the western markets while the end of active refinery maintenance in Asia will also boost the output of naphtha in the region, traders said.

Demand, on the other hand, is seen stable and would be enough to absorb the available supplies. Premiums on naphtha spot trades last week, however, were knocked off from recent highs since supplies are easily obtainable, they said.

A slowing Chinese economy weighs on the naphtha market as concerns over weakening plastic demand abounds, traders said. Market confidence has been dented after China posted a first-quarter 2013 GDP growth of 7.7% versus 7.9% in the fourth quarter last year.

However, higher ethylene margins using naphtha feedstock helped support the market to some extent.

Northeast Asian ethylene margins based on naphtha feed edged up by $8/tonne to $212/tonne in the week ended 19 April as the benefits of a $23/tonne drop in naphtha prices outweighed weaker ethylene prices and lower co-product credits, according to ICIS weekly margin report.

A price rebound in Asia’s butadiene (BD) prices also lent support to the naphtha market, traders said.

Spot butadiene (BD) prices in Asia rebounded last week and look set to continue rising as regional supply is being crimped partly by sellers taking advantage of an open arbitrage window to the US.

On 19 April, BD prices were assessed at $1,380-1,420/tonne (€1,049-1,079/tonne) CFR northeast Asia, up by an average of $75/tonne from the previous week, according to ICIS.

Japanese import demand for naphtha remains healthy, providing a fillip to prices, traders said.

Japan's imports of naphtha for ethylene production totalled 1.74m kilolitres in March, up by 9.4% month on month, preliminary data from the country’s Ministry of Economy, Trade and Industry (METI) showed.

Meanwhile, the naphtha premiums also eased recently and remained at levels in the low-$40/tonne levels and under as benchmarked against Middle East quotes FOB (free on board).

Indian state-owned refiner Oil and Natural Gas Corp (ONGC) has sold by tender a 35,000-tonne naphtha cargo for loading from Hazira on 5-6 May at a premium of $41/tonne to Middle East quotes FOB. Japanese trading firm Marubeni won the cargo.

On 22 April, Asia’s naphtha spread between first-half June and first-half July contracts was stable at $13.50/tonne in backwardation, while the naphtha crack spread widened to $89.20/tonne versus June Brent crude futures from $88.15/tonne on 19 April, the data showed.

($1 = €0.77)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Felicia Loo

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