Asia naphtha at five-month high on crude oil rally; demand steady

SINGAPORE (ICIS)–Asia naphtha prices touched a fresh five-month high, riding on the coattails of stronger crude oil futures, amid a steady stream of demand that is envisaged to keep the market afloat.

(Source: Wallace Woon/EPA/REX/Shutterstock)

At early hours session on Wednesday, open-spec naphtha prices stood at $587.50/tonne CFR (cost and freight) Japan basis, rising by $6.00/tonne from the previous week’s close.

This brought levels to their highest since early-November 2018, according to ICIS data.

ICE Brent June crude oil futures rose to $71.99/bbl at early hours session, buoyed by an unexpected drawdown in US inventories.

The firmer sentiment was reflected in naphtha’s crack spread to June ICE Brent crude oil futures, a measure of the feedstock’s refining margin.

The crack spread closed at $50.55/tonne on 16 April, climbing from week-earlier levels at $40.38/tonne, ICIS data showed.

Naphtha’s forward market structure also held in backwardation at $4.50/tonne as of 16 April, with prompt-month prices firmer than forward months.

Demand for downstream petrochemical production has been consistent, helping to absorb regional supply.

Taiwan’s Formosa Petrochemical (FPCC) most recently returned to buy more spot naphtha supplies for second-half May delivery, changing tack from earlier plans to forego its spot requirements for the period.

FPCC secured 120,000 tonnes of open-specification naphtha cargoes at a premium of $3.50-4.00/tonne to its pricing formula for delivery to Mailiao.

The firm had earlier contemplated skipping its second-half May intake, alongside plans to tweak cracker run rates in the aftermath of a blast at a related aromatics facility.

Its downstream crackers are operating at full capacity.

FPCC previously bought 100,000 tonnes of first-half May spot naphtha supplies.

Meanwhile, an anticipated reduction in arbitrage cargoes from northeast Europe and the Mediterranean this month helped to cushion sentiment.

Other northeast Asia end-users have fulfilled their purchases for second-half May delivery.

South Korea’s Hanwha Total Petrochemical scooped up four naphtha cargoes of around 25,000 tonnes each at a premium of $5.00-7.00/tonne to spot CFR Japan quotes for delivery to Daesan.

Naphtha is a key petrochemical feedstock for downstream crackers in the manufacture of olefins and aromatics.

Focus article by Melanie Wee