Asian naphtha price peaks to two year highs, cracks stay at three-week lows

11-Nov-10

Open spec naphtha prices for H2 December have reached US$799/mt- their highest level since Sept. 26 2008. Naphtha prices in Asia extended gains to reach their highest level in over two years at the start of this week, and cracks stayed at a three-week low due to muted spot demand, as per Reuters. Demand was lackluster as South Korean petrochemical makers were not seen in the market seeking spot parcels for December delivery- probably a temporary phase. Crack spreads hovering near US$140/ton premium continue to reflect a relatively strong market, with most crackers in North Asia running at full-tilt. Traders willing to pay premiums above US$16/ton for November cargoes from India showed that sentiment was not all that weak. The window for Northwest Europe-Asia arbitrage trades is still technically closed, although Syrian cargoes will continue to sail East until end of the year following an outage at a reformer since August. Ethylene (made mostly from naphtha in Asia) prices are coming off. Naphtha prices cannot increase too much because if they do, cracker margins will not be sustained and that would affect feedstock demand.