Focus story by Felicia Loo
SINGAPORE (ICIS)--Asia’s naphtha prices are heading south amid softer blending demand in Europe and rising naphtha exports from India, traders said on Wednesday.
The volatility in open spec prices culminated in a sharp decline to $941-943/tonne CFR (cost & freight) Japan on 3 June, compared with $979.50-981.50/tonne CFR Japan a week ago, before stemming losses on midday 4 June, whereby prices for the first half of July rose by $1-2/tonne to $942-945/tonne CFR Japan, according to ICIS data.
“[Gasoline blending in Europe] is a lot lower,” said one trader.
Despite a shut arbitrage window to move European naphtha to Asia, prices remained under downward pressure, the traders said.
“The West value is pulling down [Asian] prices,” said another trader, adding that second-half delivery cargoes were still available for sales.
Reflecting the bearish market, the inter-month spread between the first half of July and the first half of August contracts weakened to $12.00/tonne in backwardation on 3 June, down from a backwardation of $13.25/tonne on 2 June. The backwardation was much firmer at $18.50/tonne in the previous week.
“Prices are down the drain and there is no [price] upside,” the trader said.
The naphtha crack spread versus July Brent crude futures continued to narrow, with the spread weakening to $127.20/tonne from $152.95/tonne last week, ICIS data indicated.
Compounding the woes, augmented naphtha supply from India weighed on the market.
India’s refiners will be exporting 680,000-690,000 tonnes of naphtha in June, compared with exports of 550,000-600,000 tonnes in May, owing to the end of major refinery maintenance, the traders said.
Downstream ethylene prices in southeast Asia slipped amid new spot supply from the Middle East, increased stock in Singapore following prolonged production issues at a derivative plant and an expected slowdown in the production activity in Indonesia in July due to the Muslim fasting month of Ramadan.
Spot ethylene prices in southeast Asia were down by $5-15/tonne to $1,445-1,465/tonne CFR SE Asia during the week ended 30 May, ICIS data showed.
Ethylene spot prices in northeast Asia were assessed as stable during the week ended 30 May at $1,435-1,440/tonne CFR NE Asia, as weak spot demand has offset firm feedstock naphtha costs and limited supply.
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