Asia to receive higher deep-sea naphtha supply in April

Focus article by Felicia Loo

SINGAPORE (ICIS)–Asia is expected to receive some 1.6m-1.8m tonnes of deep-sea naphtha supply from the western markets, including Europe and Russia, traders said on Friday.

The volume will increase from 1.4m-1.5m tonnes of western arbitrage naphtha inflows estimated for March.

Asia-bound naphtha cargoes from Europe are expected to be lower in March as Europe caters to the needs of Brazil, traders said.

Brazil is expected to import more naphtha from Europe amid refinery strikes in the US that curtail cargo availabilities for south American buyers.

“The prompt market [in Asia] has been supported due to lower arbitrage supply [previously],” said one trader, adding the poor weather condition was a major factor for the decline in arbitrage inflows broadly in February and March.

For February-arrival arbitrage imports, some 1.4m tonnes are estimated to have flown into the Asian region.

Shipment takes about 35 days for cargoes loaded in Europe to reach Asia.

“But once those factors are gone like the bad weather in the west, the arbitrage level will pick up,” the trader said.

In January alone, Asia was estimated to have received 1.7m tonnes of arbitrage naphtha inflows, the traders said.

Monthly arbitrage volumes for February and March will be lower compared with January, partly due to greater use of naphtha over propane among European crackers, they said.

In a sign of easing of supply tightness, the intermonth spread between the second half of April and second half of May contracts narrowed to $9.50/tonne in backwardation, according to ICIS data.

The intermonth spread values were higher earlier in the week at $10.00/tonne in backwardation.

At the close of trade on 5 March, the second-half April open-spec closed lower at $557.00-559.00/tonne CFR Japan, compared with $559.50-561.50/tonne CFR Japan, ICIS data showed.

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