European profit from processing crude into naphtha triples to a three-year high

17-Dec-10

European profit from processing crude into naphtha tripled to a three-year high as rising Asian petrochemical demand continues to lure shipments to China and Japan, as per Bloomberg. Naphtha’s premium to Brent crude jumped to US$3.30 a barrel on Nov. 29 from US$1.05 a month earlier, reaching the widest level since Dec. 17, 2007. Shipments to Asia is estimated to be 475,000 tons in December, compared with 500,000 tons for November and up from none in October. Europe has surplus naphtha as refiners raise crude processing rates to produce heating oil for the winter. China’s naphtha requirement will rise 28% to 1.22 mln bpd this year compared with overall oil demand growth of 11% as per the International Energy Agency. China is the driving force in chemicals with strong momentum in automobiles, electronics and construction. Japan’s imports rose 25% to 1.56 mln tons in October compared with a month earlier. China increased purchases in November and December by over 200,000 tons as refiners made less naphtha, preferring to maximize diesel production amid a fuel shortage in the country. Electricity rationing aimed at meeting energy conservation goals under a five-year plan that ends this month prompted factories to use private diesel-powered generators, driving up fuel demand. Demand for chemical products is expected to remain strong in the fourth quarter, driven by high seasonal demand and extra demand from China, due to power rationing. Naphtha in Japan rallied to a premium of US$156.80/ton versus Brent crude, compared with US$135.28/ton on Nov. 10. Saudi Aramco plans to reduce cut shipments by 10 to 20% in H1-2011, reducing naphtha exports to Asia due to a planned refinery maintenance in Q1-2011. Asia buys about 4 million tons through term contracts from Aramco every six months.