June Western exports to Asia to rise 8% in Europe, supply may stay tight on firm demand

23-May-14

Asia is expected to receive about 1.3 mln tons of naphtha in June from Europe and the Mediterranean, about 8% higher than May volumes, as per Reuters. The higher volumes come despite more alternative liquefied petroleum gas (LPG) being used to partially replace naphtha, while Indian exports for June are likely to increase over May. An estimated 300,000 tons of naphtha are expected to be replaced by LPG in June, about double the volume in May. India's June naphtha exports may hit 500,000 tons or more following two-straight months of shipments below that level due to refinery maintenance. The increased volumes are likely to be from Reliance and Bharat Petroleum Corp Ltd (BPCL)," said a trader based in Singapore. Reliance Industries has sold a total of 130,000 tons of naphtha to Vitol so far for June loading compared to 110,000 tons for May, traders said. They said the refiner could sell more for June. Reliance shut a crude distillation unit (CDU) in late March for 3-1/2 weeks of maintenance, while BPCL closed a CDU in April for two weeks. Asia will get 1.3 mln tons of naphtha in June but needs around 1.5 mln ton. The higher amount is to compensate for the recent low Indian supplies and ongoing refinery maintenance in North Asia. Higher quantities will also help offset possible lower western exports to Asia for July arrival. Europe and the Mediterranean may limit naphtha exports to Asia for July arrival due to strong gasoline demand from West Africa. Naphtha can be used to boost the octane levels of motor fuel and Europe supplies gasoline to West Africa. "European and Mediterranean naphtha coming to Asia in July may not reach the same levels as June given the current economics and higher freight costs," said another trader based in Singapore.