Asia naphtha jumps to four-month high on crude gains, market unfazed

Author: Melanie Wee


SINGAPORE (ICIS)--Asia’s naphtha prices touched a four-month high at above $700/tonne in response to high crude oil futures, but a supply overhang will keep the market slightly bearish.

 - Naphtha prices track crude gains

 - Abundant supply weighs

 - Spot cargoes fetch discounts

Open-spec naphtha prices for first-half November delivery stood at $705.50/tonne CFR (cost and freight) Japan at early hours session, climbing from $695.25/tonne CFR in the previous day, according to ICIS data.

Spot prices were last seen at such levels above $700/tonne CFR Japan in mid-September, the data showed.

But a plentiful supply scenario curbed market fundamentals as a whole, amid heavy deep-sea cargo arrivals from Europe and the Mediterranean.

Increased arbitrage flows are coming at a time when demand for the petrochemical feedstock is being curbed by downstream cracker turnarounds.

As much as 1.5-1.6m tonnes of western origin arbitrage naphtha is estimated to arrive in Asia this month, more than average monthly volumes of 1.2-1.3m tonnes, according to traders.

“I think the [bearish] market now is because of prompt length, which should recover once the length is clear”, a southeast Asia-based market source said.

“The peak season will start after Far East turnarounds … the market may recover from end 2018), a Singapore-based trading said.

That said, naphtha demand for the purposes of downstream petrochemical and olefins production margins were still healthy.

Spot end-user purchases in northeast Asia have been done at discounts for October and November supplies, down from premiums before.

Taiwan’s Formosa Petrochemical (FPCC) has secured spot naphtha for 1-10 November delivery at a discount near $2.00/tonne to its pricing formula.

Prior to this, FPCC had already bought around 100,000 tonnes of second-half October delivery naphtha at a discount near $3.00/tonne to its pricing formula.

In contrast, the firm paid a premium near $1.50/tonne to its pricing formula for second-half September material.

In a similar vein, South Korea’s Hanwha Total Petrochemical secured first-half November delivery naphtha at discount near $1.00/tonne to spot CFR.

The firm paid a premium of around $3.00/tonne to spot CFR Japan quotes for first-half October supplies.

Focus article by Melanie Wee