Caution prevails in Asian markets, marginal dip in naphtha cracks

09-Aug-11
Naphtha prices in Asia fell to a two-session high on Monday, while cracks dipped. However, this dip was less than 1%, as per Reuters, but worries abound that consumer demand could slump if recession hits and that would sharply impact petrochemicals. Current global economic scenario makes it difficult to predict the naphtha direction now. To some extent, buyers are worried about a drop in petrochemical margins due to the macroeconomic woes. However, naphtha is currently estimated to stay neutral unless there is new, stunning information on Formosa, or if Western naphtha starts to be pushed to Asia. These would weigh the naphtha market down. A weaker looking US economy could lead to a fall in gasoline demand. That would prompt Europe, which also uses naphtha for gasoline blending apart from feeding into petrochemical units, to ship unused naphtha to Asia. Price for front-month open spec naphtha for H2-September edged up to US$909/ton. Naphtha cracks inched down to US$107.25/ton premium, lowest since July 18.
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