FocusAsia’s naphtha prices rebound on refinery run rate cuts

15 November 2013 07:39  [Source: ICIS news]

By Felicia LooAsia naphtha may extend gains on renewed buying prospects

SINGAPORE (ICIS)--Asia’s naphtha prices are set to rebound in response to a reduction in refinery operating rates in the region, while demand for the petrochemical feedstock remains stable, traders said on Friday.

A spate of refinery run rate cuts had led to increased premiums that were fetched in the slew of spot trades and tenders in the week, they added.

On Friday midday, open-spec second-half December prices rose to $957-959/tonne (€708-710/tonne) CFR  (cost and freight) Japan, up from $919.50-921.50/tonne CFR Japan at the close of trade on 8 December, according to ICIS data.

The naphtha crack spread soared to $151.08/tonne against Brent crude futures on 14 November, from $144.93/tonne on 8 November, it stated.

 “The refinery runs are lowered because of poor margins. The South Korean refiners as well as a refiner in Singapore have cut [run rates],” said one trader.

Partly because of poor gasoline prices, refiners are reluctant to produce much light distillates of both gasoline and naphtha from the cut of a barrel of crude, the traders said.

South Korea’s Yeochun NCC (YNCC) has bought 50,000 tonnes of open-spec naphtha for delivery to Yeosu in the first half of January, at a premium of $17/tonne to CFR Japan quotes.

The premiums more than doubled from its previous purchase owing to refinery run cuts in Asia.

Back then, YNCC had bought 75,000 tonnes of naphtha for delivery to Yeosu in the second half of December, at a premium of $7.50/tonne to Japan quotes CFR.

India’s Bharat Petroleum Corp Ltd (BPCL) has sold by tender 38,000 tonnes of naphtha for loading from Mumbai on 14-16 December, to Japanese trading firm Marubeni, at FOB Middle East quotes plus $38/tonne.

Previously, BPCL sold a similar-sized naphtha cargo by tender to Japanese trading firm ITOCHU, at a premium of $23-24/tonne to FOB Middle East quotes for loading on 23-25 November.

However, the price gains in naphtha were capped as other market participants said the supply of naphtha remained readily available.

The intermonth spread between second-half December and second-half January contracts narrowed to a backwardation of $10.00/tonne on 14 November, compared with a backwardation of $12.75/tonne on 8 November, ICIS data showed.

“There are more than enough cargoes being offered,” said one trader.

The deep-sea volumes from the western markets rose to 1.5m tonnes in the week, from 1.3-1.5m tonnes in the previous week, the traders said.

The rising prices in Asia helped to make the arbitrage economics workable, while poor gasoline blending needs in Europe prompted market players to move supplies to Asia from the West, they added.

The rise in arbitrage volumes could more than compensate the overall reduction in Indian exports versus the earlier months.

India’s December naphtha exports are expected to reach 650,000 tonnes in December, up from its November shipment volumes of 600,000 tonnes, due to the completion of major refinery turnarounds in the country.

However, the December volumes will remain lower than the October shipments because of some extended refinery works, the traders said.

($1 = €0.74)

By: Felicia Loo

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