As of now Japan needs only middle distillates for reconstruction, so naphtha- and gasoline-rich crudes from the Middle East are going to suffer. Values of condensates may be particularly affected because of the closure of Japanese petrochemical plants, as per Reuters.
Barclays Capital estimates that Japan will require the equivalent of 204,000 bpd of oil (about 30,000 tons), similar to a Very Large Crude Carrier (VLCC)-load of low-sulphur cargoes every eight days, to replace the power-generation capacity lost as a result of the nuclear meltdown. For naphtha, with at least a third of Japan’s cracker capacity shut, the Asian market is expected to weaken further after its cracks fell to a week-low level. Sellers have approached naphtha buyers in South Korea and Taiwan to take in prompt cargoes and traders are concerned about the prospect of losing a key demand outlet for an extended period of time. In 2010, Japan used 47.38 million kiloliters (816,468 barrels per day) of naphtha with imports averaging at around 465,000 bpd. JX Holding’s JX Nippon Oil & Energy Corp is working to shut all units at a 404,000 tpa naphtha cracker at Kawasaki, Mitsubishi Chemical has halted operations of two naphtha crackers with capacity to produce 826,000 tpa of ethylene at Kashima after a power outage. Maruzen Petrochemical shut a 480,000 tpa unit in Chiba while its Keiyo Ethylene unit shut a 690,000 tpa cracker. Before the earthquake struck, the market was slightly on the bullish side due to thinning Middle East inflows resulting from maintenance. After the earthquake, the market continues to dump. Concerns abound that if the crackers force majeure on the supplies, the market will have a sudden glut.