Naphtha prices in Asia fell for a third straight session to a nine-week low on Wednesday at US$1042.50/ton. This fall has been triggered by weaker Brent crude, though inter-month spreads were steady while cracks edged up to a two-session high, as per Reuters. Despite an unusually high volume of spot in a single offer by Saudi Aramco, there was probably enough demand to soak up cargoes for now. Saudi Aramco offered 40,000 tons of A316 grade naphtha for May 29-31 loading from Rabigh to be co-loaded with 15,000-16,000 tons of A310 from Jeddah. It also included an option for buyers to lift either 55,000 tons of 180 grade naphtha for May 12-15 loading from Yanbu or 75,000 tons for May 15-18 loading from the same port.
Not all South Korean buyers were covered for cargoes arriving in H2-May. As per market players, at least one buyer needs an additional 50,000 tons. “There may be more cargoes coming out from the Middle East, but that will be offset by the strong demand," said a trader in Reuters. This was reflected in the steep premiums buyers were willing to pay for May cargoes. Reliance, for instance, sold 75,000 tons of naphtha for May 8-11 loading from Sikka at premiums of about US$50/ton, while Idemitsu paid premium of US$44/ton to ONGC for a 35,000 ton cargo lifting on May 9-10 from Mumbai port.
Weaker fundamentals are likely to set in once Saudi Aramco completes its maintenance at a condensate splitter in Ras Tanura. The unit is expected to resume operations in early May. Asia's top naphtha buyer, Formosa, shut a 700,000 tpa cracker for 40 days starting June 20, which will also hit sellers. That would wipe out at least 200,000 tons of naphtha demand during the shutdown period.