US arbitrage window closes, firm propane bolsters Asia naphtha markets

24 January 2014 11:15  [Source: ICIS news]

SINGAPORE (ICIS)--Asia’s naphtha markets are likely to be supported by the closure of the arbitrage window moving US supplies to the region, as well as firm propane prices, traders said late on Friday.

The US arbitrage route to Asia is now shut because the more attractive blending economics in West Africa are drawing the US heavy naphtha grade instead to that region instead.

Usually, Asia will receive some 300,000 tonnes of naphtha from the US whenever the arbitrage economics work.

“The US [arbitrage] window is closed. There is a slight bull side,” said one trader. Another boost was from rising propane prices, the traders said.

Propane markets firmed on falling stockpiles in the US, where supplies declined for the 14th consecutive week, reaching the lowest level since the week ending 3 June 2011, the US Energy Information Administration (EIA) said on 23 January.

Propane stocks fell by 8.8% for the week ending 17 January, the EIA said. Year on year, supplies are down by 42.0% from 60.9m bbl in the same week of 2013.

Strong regional demand from Taiwan and South Korea helped to further boost the prices of naphtha in Asia.

While the first-half March open-spec naphtha prices closed at $958-960/tonne CFR (cost & freight) Japan on Friday - down by $4/tonne from 23 January - the prices were still stronger than the $934.50-936.50/tonne CFR Japan levels seen on 20 January, ICIS data showed.

Prices dipped on Friday on the back of slowing trade activity, as China winds down for the Lunar New Year holiday next week, the traders said.

By: Felicia Loo

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