Asia naphtha prices to ease on ample deep-sea supply

12-Jun-13

Asia’s naphtha prices may weaken in response to bountiful supply of deep-sea cargoes and softer petrochemical demand as well as gasoline blending demand requirements start to taper off, as per traders in ICIS. H2-July open-spec naphtha contract was valued at $870-873/ton (€652.50-654.75/ton) CFR (cost & freight) during the morning trading on Tuesday, down by US$1-2/ton from Monday, according to ICIS data. H2-July and H2-August spread narrowed to almost a year-low of US$5/ton in backwardation and the naphtha crack spread against July Brent crude futures weakened to US$91.88/ton on Monday. “My view is still bearish. The naphtha paper has been artificially propped up for a while, and there is too much physical supply,” said a trader based in Singapore. It appeared that the initial strength from gasoline blending demand is soon fizzling out, as the arbitrage window to move European gasoline to the US remains closed and this was reinforced by lower gasoline prices in the US.