Naphtha prices in Asia reached its highest in about two weeks on Thursday, while physical timespreads hit the highest level in about 7-1/2 months driven by tighter supplies and healthy South Korean demand, as per Reuters. This corresponds with the Middle East cutting back on supplies of naphtha in order to supply gas for heating purposes. Some Gulf naphtha is made from gas rather than crude, and gas is usually needed more in colder weather.
South Korea's LG Chem was heard seeking H1-February volumes, and is rumoured to have have bought a cargo for delivery to Yeosu at a premium of US$9.50/ton to Japan quotes on a cost-and-freight (C&F) basis. The exact volumes LG Chem was initially seeking were not immediately clear.
The market has also found support from better petrochemical margins. However, the widening East-West spreads, could result in more arbitrage trades to Asia from the Wes. This could cool the market. Asia's January swaps were US$18 higher than Northwest European prices vs US$15 higher the previous session. Front-month H1-February open spec naphtha rose by over 7 dollars to US$922.25/ton. Naphtha cracks for H1-February edged up by a dollar to US$111.50/ton.