Spike in Asian naphtha to 3 week highs supported by Brent crude, cracks strengthen

25-Aug-11

Naphtha prices in Asia have spiked to a three week high on Wednesday supported by Brent crude. Naphtha cracks hover around a 3-1/2 month high on firm sentiments, as per Reuters. South Korea's Samsung Total bought around 50,000 tons of open-spec grade naphtha at premiums of US$4-5/ton to Japan spot quotes on cost-and-freight (C&F) basis, similar to what rival LG Chem paid on Tuesday. Spot markets have witnessed limited avails of naphtha, as supplies are being used by the gasoline pool due to robust motor fuel demand. Supplies could have also been affected by refiners relying more on heavy crude which naturally provide a lower naphtha yield. The Dubai-Brent spread has widened and light/intermediate crude has become more expensive compared to heavy crude. Since light sweet crude is more costly, buyers will naturally turn to cheaper heavier grades. It would take an estimated 18 months for Libya's oil flow to reach the pre-war of around 1.6 mln bpd. Japan's open-spec naphtha for front-month H1-October edged up to US$955/ton, while cracks rose to US$137/ton premium, highest since May 12.