Mitsui losses to impact Asian naphtha market

28-Nov-06

The market for open-specification naphtha has long been the most liquid of Asia's derivatives thanks to its relatively simple pricing, diversity of petrochemical end users and low barriers to entry. The vibrant Asian naphtha market could take months to recover from the likely drop in liquidity following a US$81 million trading loss at Mitsui Oil Asia (MOA) Pte. Ltd. based in Singapore. The Singapore unit has closed all oil products contracts in futures, and will now hold only physical positions. Though physical flows are unlikely to be disturbed, the psychological hit may affect physical traders. The market could see reduced liquidity in the open-spec naphtha market leading to more power in the market for big (physical) players.