Naphtha crack in Asia plunges to 26 month low

15-Oct-14

At the end of the previous week, naphtha crack in Asia plummeted to a 26-month low of US$62.6/ton, extending losses for a fifth straight session in its longest losing streak since late July. Naphtha has been dragged down by plunging crude prices and massive light fuel supplies, as per Reuters. LG Chem bought naphtha for H2-November delivery, with traders estimating the price at US$8-10/ton below Japan quotes on a cost-and-freight (C&F) basis, making this the widest discount seen in South Korea since 2010. Traders said there were no immediate signs that the market would improve for sellers, even with petrochemical units running at high rates, because of the large amount of naphtha feedstock in inventory. Petrochemical makers' tanks to store naphtha were mostly full but supplies from refineries continued unabated, with no deep run cuts seen in Asian refineries so far. Weak Brent crude prices are likely to keep naphtha inventory levels high as sellers supply buyers with up to 10% more naphtha than the contracted volumes. This helps the sellers get rid of more supplies quickly and avoid having to sell the naphtha at even lower prices ahead.