Naphtha cracks in Asia plunge to 4 month lows, prices rise

09-Nov-11
In line with robust Brent crude, naphtha price rose to a three-week high on Tuesday. However, this has hurt the light distillates margins as there is no lack of supplies, making it difficult for sellers to pass on refining costs, as per Reuters. However, naphtha cracks plunged by nearly 30% to a two-week low and gasoline cracks were at their lowest in close to four months. Naphtha physical timespreads strengthened, however, and went into a slight premium compared to flat levels on Friday. The hike does not seem to be related to fundamentals, which had persistently been weak due to limited polymer demand. Instead the slight premiums are a reflection of what the sellers would want as robust crude prices made it difficult for them to sell available cargoes at discounts. Currently, sellers do not appear anxious to dispose off cargoes, amid the reverse arbitrage window that is technically shut since last week. This indicates that sellers may have limited sales outlets could be forced to sell at low prices if demand fails to pick up. In a buyer’s market, Honam Petrochemical has come forward with its term tender, the third South Korean firm to seek naphtha for 2012. Its tender closes on Thursday, with offers to stay valid until Nov. 14. YNCC and Samsung Total had in H2-October and early November secured a total of about 1.4 mln tons of naphtha for next year's arrival. Bahrain Petroleum Co (Bapco) has not yet fully finalised its deals with Asian buyers despite having reduced its offers by four dollars to US$18.50/ton to Middle East quotes on a free-on-board (FOB) basis for naphtha lifting in 2012. Similarly, ADNOC is waiting for Asian buyers to respond on Nov. 8 to its offers quoted at US$19/ton to its formula for splitter grade, US$20/ton for low-sulphur naphtha and US$21/ton for pentane plus. The lifting for these grades is from January-December 2012. Cracks for H1-December fell by US$14 US$34.03.
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