FocusAsia naphtha to weaken on rising supply; crack spread shrinks

02 December 2013 04:32  [Source: ICIS news]

By Felicia Loo

Asia naphtha to weaken on rising supply; crack spread shrinksSINGAPORE (ICIS)--Asia’s naphtha prices are likely to face downward pressure from rising supply, as reflected in the shrinking values of the crack spread and intermonth backwardation, traders said on Monday.

Open-spec second-half January contract fell to $960.50-963.50/tonne (€710.77-712.99/tonne) CFR (cost and freight) Japan on Monday morning, down by $7.50-8.50/tonne from 29 November, ICIS data showed.

The intermonth spread between the naphtha contracts for second-half January and second-half February had weakened in the week ended 29 November to $12.25/tonne in backwardation, compared with a backwardation of $16.00/tonne in the previous week, the data showed.

The naphtha crack spread versus the January Brent crude futures was assessed at $138.55/tonne over the same period, compared with $152.08/tonne in the previous week, it indicated.

“The crack spreads, backwardation are narrowing. Prices are coming off. There is a lot of supply from the West,” said one trader.

Although the arbitrage window that drew western deep-sea barrels has closed, earlier fixtures totalled a hefty 1.55m tonnes to date, beating earlier estimates of 1m tonnes, market participants said.

A recent round of India naphtha export tenders has also boosted regional supply.

Naphtha exports from India are expected to climb to 650,000 tonnes in December, up from its November shipment volumes of 600,000 tonnes following the end of major refinery turnarounds in the country.

Premiums on recent naphtha deals had also weakened, reflecting the downward trend.

South Korea’s Yeochun NCC (YNCC) had bought four naphtha cargoes totalling 100,000 tonnes for delivery to Yeosu in the second half of January, at a premium of $14.00/tonne to CFR Japan quotes.

Previously, YNCC bought 50,000 tonnes of open-spec naphtha for delivery to Yeosu in the first half of January at a premium of $17.00/tonne to CFR Japan quotes.

India’s state-owned refiner Oil and Natural Gas Corp (ONGC) had sold by tender a 35,000-tonne naphtha cargo for loading from Mumbai on 20-21 December to trading firm Total. The deal for the cargo was done at $25.00-26.00/tonne to FOB Middle East quotes.

Last week, ONGC sold by tender a 35,000-tonne naphtha cargo for loading from Hazira on 16-17 December, also to Total, at a premium of $29.00/tonne to FOB (free on board) Middle East quotes.

In its previous tender, ONGC sold 35,000 tonnes of naphtha for loading from Hazira on 2-3 December to Japanese trading firm Marubeni, at a premium of $38.00/tonne to FOB Middle East quotes.

India’s Reliance Industries Ltd (RIL) has sold 35,000 tonnes of naphtha for loading from Sikka on 26-30 December at a premium of $21.00-22.00/tonne to FOB Middle East quotes over the December month's average pricing.

Earlier last week, RIL sold 110,000 tonnes of naphtha to oil major Shell and trading firm Glencore for loading from Sikka on 20-25 December.

The deal for Shell was done at a premium of $32.00-33.00/tonne to FOB Middle East quotes pricing, while the deal with Glencore was done at FOB Middle East quotes plus $27.00-28.00/tonne.

Previously, RIL sold 75,000 tonnes of naphtha for loading from Sikka on 10-15 December to Glencore at FOB Middle East quotes pricing plus $40.00/tonne.

Demand wise, regional buying needs for naphtha remained firm, traders said.

Ethylene margin based on naphtha feed rose to $152/tonne in northeast Asia in the week ended 29 November, from $102/tonne in the previous week, according to the ICIS Weekly Margin report.

($1 = €0.74)

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


By: Felicia Loo



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