Asia naphtha prices at 3.5-month high on crude oil rally

Source: ICIS News

2019/03/21

SINGAPORE (ICIS)--Asia’s naphtha prices touched their highest in over three months, riding on the back of firmer crude oil benchmarks and demand, even as supply is set to stay adequate in the short term.

Container ship docked at a port in Tokyo(Photo by Koji Sasahara/AP/REX/Shutterstock)

Spot open-specification naphtha prices for first-half May delivery on Thursday morning were at $575.25/tonne CFR (cost and freight) Japan basis, marking a $21.25/tonne increase from week-earlier levels, ICIS data showed.

Prompt-month naphtha spot prices were last this high in early November 2018 averaging at $576.50/tonne CFR Japan, according to ICIS data.

Strong gains in crude oil futures at above $60/bbl amid tightened oil supplies in the US lifted sentiment as a whole. ICE Brent May crude oil futures at $68.50/bbl, in part, helped drive up the prices of petrochemical feedstock naphtha.

Naphtha typically tracks the movement of Brent crude futures.

Naphtha’s crack spread to ICE Brent crude oil futures closed on 20 March at $63.93/tonne, the first time since early-January levels have gone above $60/tonne, ICIS data showed.

The crack spread, a measure of naphtha refining margins, stood at $55.55/tonne in the preceding week.

A recent bout of end-user buying is helping to absorb supply that is perceived as ample, if not long.

South Korea’s Yeochun NCC (YNCC) recently raked up seven parcels of 25,000 tonnes, for delivery to Yeosu, at a premium of mid-$3.00/tonne levels to spot CFR (cost and freight) Japan quotes.

Taiwan’s Formosa Petrochemical (FPCC) fulfilled its usual 100,000-tonne intake of spot naphtha cargoes for second-half April delivery, as did South Korea’s Hanwha Total Petrochemical for supplies in the same month.

While downstream olefins margins are generally healthy, demand for petrochemicals production could be tempered as a result of scheduled cracker turnarounds.

South Korea's Hanwha Total Petrochemical will shut its Daesan cracker in late March for scheduled maintenance to last for about 45 days, which will eventually raise its ethylene capacity.

Heavy volumes of arbitrage naphtha arrivals are envisaged to add to the supply surplus in Asia.

Traders estimate around 2m tonnes of western naphtha could reach Asia this month, well above average monthly volume of 1.5m tonnes.

Focus article by Melanie Wee