Price and market trends: Asia naphtha may extend gains on renewed buying prospects

18 October 2013 09:42  [Source: ICB]

As a series of cracker turnarounds come to an end, demand is expected to increase substantially

Asia’s naphtha prices may bounce higher after having risen in tandem with crude futures’ rally on 11 October, on prospects of increased buying activity as regional crackers restart after completing maintenance, traders said.

Prices rose to more than $930.00/tonne (€688.20/tonne) on 11 October, in response to hefty overnight spikes in crude values, they said. Open-spec second-half November contract rose to $931.00-934.00/tonne CFR Japan, up by $12.50-13.50/tonne on 10 October, ICIS data showed.

Buyers are expected to re-emerge with major regional naphtha crackers resuming operations late this month.

South Korea’s second-largest refiner GS Caltex is due to complete maintenance at its 90,000 bbl/day naphtha splitter in Yeosu by end-October, traders said. Taiwan’s Formosa Petrochemical Corp (FPCC) will also resume operations at its 1.03m tonne/year cracker by the end of the month, they said.

GS imports around 300,000 tonnes of naphtha each month, while FPCC buys a monthly spot supply of 200,000-300,000 tonnes, traders said.

Sharp gains in energy prices overnight also drove up naphtha prices. November Brent futures closed up by $2.74/bbl to $111.80/bbl on 10 October, while November NYMEX WTI futures settled $1.40/bbl higher at $103.01/bbl.

Asia’s naphtha market is also being buoyed by expectations of easing supply pressure, as exports from Indian refiners are seen sliding to 750,000 tonnes in October from 800,000 tonnes in September, market sources said.

In November, India’s naphtha exports to Asia are expected to maintained 750,000 tonnes amid refinery turnarounds in the country, both planned and unplanned.

However, the market is still perceived as weak because the cut in Indian exports was not huge enough to ease the ample cargo availability, some traders said.

Continuing strong arbitrage inflows have been weakening the price differentials fetched in tenders and spot transactions.

Asia is expected to receive a bumper volume of a million tonnes of deep-sea naphtha supply from the western markets in November, broadly similar to October levels of between 800,000 tonnes and a million tonnes, in spite of autumn refinery maintenance in Europe, traders said.

So far, 800,000 tonnes have been fixed for November, and the market is expecting the November volumes to hit 1m tonnes. The deep-sea cargoes hail from northwest Europe, the Mediterranean, Russia and the US.

The Asian market is already reeling from receding demand from the gasoline blending pool at a time of strong influx of naphtha imports from the Middle East, traders said.


By: Felicia Loo



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