Asia naphtha drops below $600/tonne on sharp crude oil losses

SINGAPORE (ICIS)–Asia’s naphtha prices plummeted to their lowest level in seven months, dragged down by steep losses in crude oil futures overnight and amid a supply glut.

Oilfield workers prepare supplies for oil rigs in Liaodong Bay of the Bohai sea in Tianjin, China.(Photo by Lou Linwei/REX/Shutterstock)

On Friday morning, open-spec naphtha prices for second-half December delivery stood at $593.75/tonne CFR (cost & freight) Japan, down by 2% from the previous day’s close.

Current prices are at levels not seen since April, according to ICIS data.

January ICE Brent crude oil futures were trading lower at $72.56/bbl early on Friday, following news of record crude production by Russia, Saudi Arabia and the US.

At the close of trade on Thursday, Brent crude slumped $2.15/bbl to $72.89/bbl.

The bearish market sentiment was reflected in naphtha’s crack spread to prompt-month January ICE Brent crude futures, which dropped to $49.90/tonne at the close of Asia trade on 1 November, with lows at under $50/tonne not seen since July 2017.

While demand for the petrochemical feedstock was rather consistent, it appeared not enough to boost the market.

Spot cargoes purchased by end-users in Asia Pacific for December delivery continued to fetch discounts compared with premiums done in previous months.

South Korea’s Hanwha Total Petrochemical secured first-half December naphtha at a discount near $2.00/tonne to spot CFR (cost and freight) Japan quotes.

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

Malaysia-based Lotte Chemical Titan also bought December spot naphtha at a mid single-digit discount to spot CFR Japan quotes.

Further exacerbating the bearish market awash with supply, arbitrage naphtha flows from Europe are expected to be heavy, possibly similar with October estimates at around 1.5m-1.6m tonnes, more than monthly volumes that typically average 1.2m-1.3m tonnes.

Focus article by Melanie Wee