Asian naphtha crack hovers at 2 week high amid persistent strong demand for gasoline from West Africa

27-May-14

Asian naphtha crack hovered around a two-week high on Monday at US$153.7/ton due to persistent strong demand for gasoline from West Africa, as per traders in Reuters. Naphtha can be reformed into gasoline or be used as a blend stock. Europe is supplying gasoline to West Africa, which will cut its naphtha exports to Asia for July arrival. Despite the high crack level, no naphtha deals have taken place in the Singapore cash market since May 9. “The strength in the naphtha is coming from gasoline. This gives traders little confidence that the market can stay supported in the long term," a Singapore-based source said. Gasoline demand usually peaks during the northern hemisphere summer and the Muslim fasting month. As a result, steady demand from the petrochemical sector is crucial to supporting the recent bull-run in naphtha. But talk of weaker petrochemical margins due to growing supplies and additional naphtha from new condensate splitters in Singapore and South Korea from H2-2014 was weighing on sentiment. Japanese petrochemical makers expect the ethylene margin to fall from July as that's when most cracker maintenance will be over, opined a Singapore-based source.