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SINGAPORE (ICIS)--Asia’s naphtha intermonth spread tumbled to a month’s low on Tuesday, on prospects of dwindling demand for naphtha as end-users might be enticed to use more liquefied petroleum gas (LPG) given a weaker LPG market, traders said.
The spread between the second-half February and second-half March naphtha contracts narrowed to $12/tonne in backwardation from $18.50/tonne in backwardation on Monday, they said.
The front-month backwardation was at its weakest levels since 12 December 2013, when it closed at $10.75/tonne, ICIS data showed.
“From March [onwards], LPG cracking will be easier to most end-users [given] a weaker LPG market,” said one trader.
The abundance of arbitrage supply further added downward pressure on prices, he added.
At the close of trade on Tuesday, the first-half March/first-half May spread changed hands from Vitol to BP at $32.50/tonne, the traders said.
The deal for the second-half March contract was done at $940/tonne from SOCAR to Marubeni, while the spread between the second-half February/first-half March was being traded at $7/tonne from Total to Gunvor, they said.
The second-half February contract fell to $958.50-960.50/tonne CFR (cost & freight) Japan on Tuesday, down by $11.50/tonne from Monday, ICIS data showed.
Meanwhile, the naphtha crack spread tanked to $158.13/tonne on Tuesday, down from $168.65/tonne on Monday, it indicated.