Asia naphtha spirals to one-month low on crude oil rout

Author: Melanie Wee

2020/09/09

SINGAPORE (ICIS)--Asia naphtha prices fell to a one-month low in response to weaker crude oil futures, despite sustained spot demand for October shipments that served to keep the product’s crack spread afloat.

At the noon session in Asia on Wednesday, open-specification naphtha prices for second-half October averaged $379.00/tonne CFR (cost and freight) Japan, down by some $17/tonne from the preceding day’s close.

Spot prices extended falls at the week’s outset, with the latest decline sending prices to a one-month low since early August at $376/tonne, according to ICIS data.

ICE Brent November crude oil futures stood lower at $39.51/bbl during the noon session in Asia, after Saudi Arabia made price cuts to its oil supply compounded by fears over rising coronavirus cases in India and the US.

Steady spot naphtha buying for October cargoes in part aided in limiting the bearish impact on market fundamentals.

Taiwan’s Formosa Petrochemical (FPCC), a key importer, was in the market seeking spot naphtha cargoes for second-half October delivery amid negotiations being finalised.

FPCC is carrying out maintenance at its No 3 cracker that are scheduled to be completed by end-September.

The firm has recently purchased first-half October delivery naphtha spot supplies.

Naphtha’s crack spread, a measure of its refining margin, held at $85.60/tonne as of 8 September, up from $77.30/tonne a week earlier, and $55.98/tonne a month earlier.

A string of spot cargo purchases in South Korea, likewise for October arrival, is helping to soak up regional supply.

Elsewhere in Europe, naphtha spot values were under downward pressure amid an overall well-supplied market.

Asia naphtha’s market structure held in backwardation, albeit narrower in intermonth spread. Spot prices for second-half October delivery stood $3.25/tonne higher than second-half November, shrinking from the $6.50/tonne spread on 4 September.

Focus article by Melanie Wee

Additional reporting by Shruti Salwan