Asia naphtha bearish on bloated arbitrage imports, oil rout

SINGAPORE (ICIS)–Asia’s naphtha market is increasingly bearish amid oil futures rout and higher-than-expected arbitrage imports in May that compound regional supply woes.

(Source: Xinhua/REX/Shutterstock)

Naphtha prices plummeted on Friday, reversing gains made earlier in the week on the back of persistent ample supply — exacerbated by voluminous flows of Western deep-sea cargoes, estimated to total a higher 1.5m tonnes this month.

At early hours session, first-half July delivery open-specification naphtha prices stood at $505.75/tonne CFR (cost and freight) Japan, tumbling by a hefty $28/tonne from the previous day’s Asia close, according to ICIS data.

Some traction gained earlier in the week was short-lived, with current spot naphtha prices at fresh lows in more than three months.

Naphtha’s price decline comes alongside an overnight drop in global crude oil benchmarks. ICE Brent crude oil futures for prompt-month July settled lower at $65.86/bbl, following news of US President Trump’s plans to impose tariffs on imports from Mexico, raising concerns on global economic growth.

Asia’s naphtha market fundamentals were otherwise bearish – with the forward market structure mired in a contango – where prompt-month prices are weaker than forward months.

The availability of cheap alternative liquefied petroleum gas feedstock dampened demand for naphtha.

On the buy side, Taiwan’s Formosa Petrochemical (FPCC), a key naphtha importer, has yet to purchase spot naphtha for first-half July delivery stem.

South Korea’s Yeochun NCC (YNCC) has bought first-half July delivery supplies at a deeper discount than its previous purchase of second-half June supplies.

Reinforcing the weak market, naphtha’s crack spread, a measure of naphtha refining margins fell throughout the week, with the Asia close at $10.93/tonne on 30 May at its lowest in six months.

Focus article by Melanie Wee

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