The already damp Asian markets could witness further deterioration in market outlook and sentiments with a supply glut from the Middle East. As per Reuters, almost 700,000 tons of spot naphtha for July-August loading will be exported by 4 major Middle East producers (Saudi Aramco, Tasweeq, Adnoc, KPC) at a time when naphtha demand has been affected by sluggish buying interest from China.
Saudi Aramco, Tasweeq Abu Dhabi National Oil Company (Adnoc) and Kuwait Petroleum Corp (KPC) together export over 20 mln tpa of naphtha, but mostly via term contracts. However, in the past 10-12 days, these four suppliers have flooded the markets with spot barrels, in a surprise move. Asia could see the rare trend of high spot barrels from the Middle East persists through the short haul, as the suppliers find ways to release their cargoes. Adnoc has additional 2 mln tons of naphtha to sell on account of increased production at its splitters after obtaining more condensate feedstock from its liquefied natural gas (LNG) train.
Term buyers in Asia have either dropped their contracts or reduced volumes due to high prices. Adnoc’s high term premiums for July 2010-June 2011 at US$22.50-24/ton to its own price formula had put some buyers off, with at least two buyers dropping the contracts. Similarly, South Korean buyers had rejected KPC after it decided to sell its August 2010-July 2011 supplies at premiums at US$21/ton to Middle East quotes on a free-on-board (FOB) basis. KPC sold more than the 74,000 ton light and full-range grades for July loading it had initially shown in its tender. Saudi Aramco, which saw some of its customer reducing term volumes, has already sold a rare spot parcel from Jubail and is in talks to sell another 55,000 tons for co-loading from Jeddah and Yanbu on July 14-15. Tasweeq, which has sold more than 100,000 tons for July, is looking to sell up to 100,000 tons for August in a tender due to be awarded on July 15.-