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