Asia naphtha intermonth spreads rebound

20 February 2014 10:51 Source:ICIS News

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SINGAPORE (ICIS)--Asia's intermonth naphtha spreads have rebounded at the close of trade on Thursday, supported from firming gasoline blending economics, traders said.

The first-half April/first-half May spread widened to $8.00/tonne in backwardation from a backwardation of $7.00/tonne on 19 February, ICIS data showed.

At a spread of $8/tonne, the backwardation is at its strongest since 7 February, when the backwardation stood at $9.50/tonne.

The backwardation of second-half April/second-half May also strengthened by $1.00/tonne from 19 February to $8.00/tonne, the data indicated.

A week ago, the naphtha intermonth spreads slumped to their lowest in nearly four month on hefty cracker turnaround and voluminous deep-sea inflows from the West for delivery in March.

However, the situation has since gotten better in response to firming blending margins.

"The blending margins are improving," said one trader, referring to the situation in Europe.

The naphtha market has been boosted by improving blending margins in Europe, as well as expectations of rising gasoline import demand from Indonesia, ahead of the country's upcoming election, traders said.

Stronger gasoline demand will support higher use of naphtha in the blending pool, while arbitrage naphtha supply will tighten from Europe as more naphtha supply gets diverted for blending, they said.

Open-spec first-half naphtha prices closed firmer on Thursday, rising by $1/tonne from Wednesday to $942.00-944.00/tonne CFR (cost & freight) Japan. This followed on a deal whereby the second-half March/first-half April spread changed hands at $4/tonne from Shell to Statoil.

Meanwhile, the naphtha crack spread versus April Brent crude futures widened to $117.25/tonne from $116.03/tonne over the same period, based on ICIS data.

By Felicia Loo