Algeria’s Sonatrach declares FM on naphtha cargoes from Skikda complex

10-May-13

Algerian state-owned energy group Sonatrach has declared force majeure on naphtha cargoes from its Skikda complex, as per industry sources in ICIS. Sentiment has turned bullish in the naphtha market, fuelled by news of the reduced naphtha supply from Skikda, coupled with improving gasoline demand and good Asian export volumes. News of the unconfirmed force majeure broke on 8 May, but Sonatrach had already cancelled three of its naphtha cargoes on the previous day. Sources estimate the cancelled cargoes amount to a loss of 100,000-120,000 tons of naphtha supply. Sonatrach was not immediately available for comment, and has not officially confirmed the force majeure. Two of the naphtha cargoes were bound for Brazil. A fourth cargo, for US producer Dow Chemical, has merely been postponed and not cancelled. However, “there isn’t any issue with the actual refinery”, the first trader said. Sonatrach runs a 335,000 bpd refinery at Skikda, which had recently been partially shut down for maintenance. European spot naphtha cargoes rose sharply to US$837/ton CIF (cost, insurance and freight) NWE on Tuesday evening, with US finance major Morgan Stanley buying from Swiss trader Vitol when news of the cancelled cargoes first broke out. Prices rose because Skikda has cancelled three or four cargoes leading to a shortfall in supply to the tune of 100,000-120,000 tons. Naphtha cracks have seen a tremendous bounce back.