Naphtha Crack In Asia At Near 4-Month High

Naphtha crack in Asia at near 4-month high

26-Sep-16

Asia's naphtha crack extended gains to reach a near four-month high of US$60.9/ton. The intermonth spreads flipped to a premium or backwardation for the first time since April 27 on demand and expectations of lower supplies, as per Reuters. When fundamentals are strong, the front-month price is usually higher than the following month. The current strength in the market was driven mainly by supply, traders said.

Qatargas has delayed the start-up of its new 146,000 bpd Ras Laffan 2 condensate splitter, a unit which makes naphtha. Qatar, which usually prefers to tie up most of its naphtha through long-term contracts, had offered through tenders a total of 200,000 tons of spot naphtha for October loading. These spot tenders were to be awarded on Sept. 21, but no results have been made clear.

In South Korea, LG Chem bought a naphtha cargo for H1-November delivery at a discount of US$3/ton to Japan quotes on a cost-and-freight (C&F) basis. Not only was the discount level four times narrower versus what the petrochemical maker had paid on Aug. 25, it also marked the narrowest discount seen in South Korea since June 16.

Lotte Chemical was the second buyer in South Korea this week to purchase naphtha for the H1-November following a sharp jump in spot prices in the previous session, when discounts were at their narrowest since June 27. The petrochemical maker bought the fuel at a discount of US$4-4.50/ton to Japan quotes on a cost-and-freight (C&F) basis. The price levels were similar to YNCC's purchase made on Tuesday. "Going forward, Lotte Chemical's spot purchases will fall as they will be off-taking naphtha from Hyundai Oilbank. "The current higher spot price could be a technical correction as the discounts went too deep previously," a North Asian trader said, adding that naphtha was still bogged down by oversupply.
Hyundai Oilbank has a new condensate splitter coming on stream next month where the bulk of its oil products yield is naphtha. Lotte Chemical is expected to receive about 1 million tonnes of naphtha a year from Hyundai Oilbank. India's Bharat Petroleum Corp Ltd (BPCL) has sold to Petro-Diamond at a discount of US$1/ton to Middle East quotes on a free-on-board (FOB) basis.