Asia to see huge deep-sea naphtha cargo flows, prices expected to ease off

01-Mar-12

Asia’s naphtha prices that are hovering near 10 month highs, are expected to slide, on flow of approximately 1 mln tons of deep-sea cargoes into the region between H2-March and mid-April, as per ICIS. Naphtha for delivery in H1-April was assessed atUS$1098-1100/ton CFR Japan, while prices for cargoes to be delivered in H2-April were at US$1085-1087/ton, at the close of trades on Tuesday. Prices were last seen at these levels on 29 April 2011. In Europe, naphtha was at US$1062-1070/ton CIF NWE, while prices in USA were at 281.50-282.50 cents/gal FOB barge on Tuesday. Expectations that the current tight supply in Asia will soon ease caused premiums on sold cargoes in the region to fall from a high of US$46/ton paid on 24 February. The biggest premium was applied on a 38,000-40,000 ton parcel that awarded to Japanese trader Itochu by Indian Oil Corp. The cargo is for loading on 26-28 March from Dahej. Lingering concerns about the health of the global economy that affect global crude trades, will also weigh on naphtha prices in the region. Many cracker operators and traders have already covered their short positions, so there is less panic among buyers today. Indian producers are flooding the market with naphtha parcels via tenders to take advantage of the bullish sentiment, but it is doubtful whether market participants will be as aggressive as in the previous week. Indian Oil Corp, HPCL and Indian refiner Oil and Natural Gas Corp (ONGC) are among the companies looking to offload naphtha parcels this week- HPCL has issued a tender to sell 25,000-30,000 tons for loading from Vizag. IOC has also issued a tender to sell 30,000 tons to be loaded from Kandla on 26-28 March. ONGC has issued a tender to sell 35,000 tons for loading from Mumbai on 21-22 March.