Marginal rise in naphtha crack in Asia

27-Aug-14

At the start of the week, Asia's naphtha crack rose marginally to US$135.3/ton, supported by demand for term barrels. In the three weeks since August 7, South Korea's YNCC, Lotte Chemical and KPIC have signed purchase contracts of 6-month, 12-month and 15-month durations respectively for a total of about 900,000 tons. All the contracts start in October 2014. LG Chem has also signed a term deal, but details were not immediately clear, as per Reuters. "October barrels are committed and ADNOC's maintenance should have some impact too," said a Singapore-based trader. ADNOC is shutting two condensate splitters, one after another, between October and January. Although this is planned maintenance, traders said ADNOC will likely allocate less volumes to its term customers. Based on term agreements, ADNOC has the option of lowering a contracted volume by 5% to its buyers. The naphtha market was under pressure recently after about 2 mln tons of naphtha were scheduled to arrive in Asia in September. The weak fundamentals were reflected in last week's sales tenders, where premiums of cargoes for September loading from India fell below US$15/ton to Middle East quotes on a free-on-board (FOB) basis versus cargoes for August loading sold mostly above US$20/ton. Qatar's Tasweeq has likely sold a full-range naphtha cargo and a gas-to-liquid naphtha grade for end-September lifting at a premium of about US$12/ton to Middle East quotes on a free-on-board (FOB) in the week of August 18.