Asia naphtha crack value soars on tighter arbitrage supply

14 March 2014 10:38 Source:ICIS News

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SINGAPORE (ICIS)--Asia's naphtha crack spread scaled up to more than $130/tonne at the close of trade on Friday, buoyed by tightening supply of deep-sea inflows, traders said.

The crack value against April Brent crude futures strengthened 4.5% from Thursday to $132.33/tonne on Friday. At that level, the naphtha crack spread is at its highest since 5 February when the crack value was at $133.90/tonne.

"The arbitrage window has closed," said one trader, adding that this would limit the influx of supply from Europe.

Asia is set to receive close to a million tonnes of deep-sea supply from northwest Europe, the Mediterranean, Russia and the US, traders said.

The volumes tumbled from the 1.6m-1.7m tonnes of arbitrage naphtha imports in March, partly because firming gasoline demand absorbed naphtha into the blending pool in Europe.

Open-spec second-half April contract rose by 50 cents/tonne from 13 March to $937.50-939.50/tonne CFR (cost & freight) Japan on Friday, following a cash trade at $933/tonne for first-half of May-delivery cargo, which changed hands from oil major Shell to Japanese trading firm ITOCHU.

Meanwhile, the naphtha backwardation was stable at $11/tonne for the spread between the second-half April/second-half May contracts.

Demand wise, spot buying has been somewhat subdued owing to a raft of cracker maintenance in Asia, which is incidentally more active than the previous year.

By Felicia Loo