Asia September deep-sea naphtha inflows jump 42% on month

(adds details)

By Felicia Loo

SINGAPORE (ICIS)–Asia is set to receive some 1.7m tonnes of deep-sea naphtha inflows in September, representing a 42% surge from August volumes, prompting the recent overall decline in prices of the petrochemical feedstock, traders said on Friday.

August arbitrage volumes are about 1.2m tonnes, they said.

“There are many unsold cargoes in the market from the West,” a trader said explaining naphtha’s price crash early in the week.

The arbitrage supply hails from northwest Europe, the Mediterranean, Russia and the US.

Naphtha prices have plummeted during the week, with the backwardation weakening to $3.00/tonne on 7 August compared with $7.00/tonne a week ago, ICIS data showed.

On Friday morning, however, open-spec naphtha prices rose in response to rising crude futures. Naphtha prices were at $918.50-921.50/tonne CFR Japan, up by $6.50-7.50/tonne from the previous day.

Prices tumbled to $912.00-914.00/tonne CFR Japan on Thursday versus $940.00-942.00/tonne CFR Japan in the previous week, according to ICIS.

Supply from the West is set to increase as demand for naphtha from the gasoline sector is still soft in Europe despite a draw in gasoline stocks in the US last week.

Data from the Energy Information Administration (EIA) revealed a larger-than-expected 4.40m barrel drop in US gasoline inventories last week.

In the US, the end of the summer driving season is approaching, hence demand is unlikely to pick up significantly in the coming days.

Moreover, European petrochemical demand for naphtha is low because of cracker outages and amid availability of cheaper alternative feedstocks, industry sources said.

Reflecting a bearish market, the spot naphtha premiums transacted during the week had fallen to low single-digit levels.

Korea Petrochemical Industry Co (KPIC) has bought a 25,000-tonne full-range naphtha cargo for delivery to Onsan in the first half of September, at a premium of $2.00-3.00/tonne to CFR Japan quotes, traders said.

Separately, South Korea’s LG Chem has purchased a 25,000-tonne naphtha cargo of full-range material for delivery to Daesan in the first half of September, at a premium of $2.00/tonne to Japan quotes CFR,

Additional reporting by Cuckoo James in London

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections