Naphtha crack in Asia dips to 2-1/2-week low amid muted demand

20-Jul-19

Asia's naphtha crack fell to a 2-1/2-week low of US$24.90/ton on Tuesday, hit by a second straight day of muted demand, while gasoline margins were near a one-week low of US$7.22/barrel, tracking weaker Brent crude, as per Reuters. Gasoline margins still reflected a firm market, however, as they were 22.8% lower than this year's peak at US$9.35 but substantially higher than the lowest seen for this year at a discount of US$2.85.

Production cuts caused by previous unworkable margin levels and maintenance had supported the gasoline market. India's Bharat Petroleum Corp Ltd bought gasoline in a rare move for July arrival at Kandla to meet demand and plug a supply gap due to heavy refinery maintenance as refiners upgrade to produce clean fuels from 2020 as mandated by the government.

The 20,000-tonne cargo was bought at premiums of about US$9 a barrel to Singapore quotes on a cost-and-freight basis. Stronger gasoline fundamentals were also reflected in Chinese CNOOC's sale of a gasoline cargo scheduled for Aug. 11-12 loading from Huizhou at a roughly US$2 a barrel premium to Singapore quotes on a free-on-board basis, double the premium it received for a cargo sold for July 10-11 loading from the same port recently.
In the United States, analysts had estimated that stockpiles of gasoline likely decreased by 1.9 mln barrels last week. Japan imported 906,282 tonnes of naphtha for June arrival. This was down 26.7% from a month earlier and also the lowest monthly import volume since April 2018. Reuters reports Japan's ethylene output in June, at nearly 493,000 tons, was down 1.69% and the lowest monthly production since February.