Naphtha crack in Asia rises to five session high on outage in Korea, lower European supplies

09-Jun-14

Asia's naphtha crack rose to a five session high of US$134.7/ton, at the end of the previous week, as an outage in South Korea coincided with lower European exports to Asia for July arrival. Higher prices of alternative feedstock liquefied petroleum gas (LPG) came at a bad time for buyers as they may need to revert back to naphtha, as per traders in Reuters, Taiwan's Formosa Petrochemical has bought 22,000 tons of LPG for July arrival, with traders pegging the price at low US$50s/ton discount to Japan naphtha quotes. The discount level was narrower compared to June volumes bought at more than US$60/ton, traders said, adding that freight rates could be behind the higher LPG prices. "European/Mediterranean cargoes coming to Asia next month are slowing down while prices of LPG are getting stronger. Naphtha often manages to bottom out fairly quickly," said a Singapore-based source. This could be due to Asia being structurally short of naphtha. In South Korea, GS Caltex had shut a 60,000 bpd hydrocracker and traders said this has likely prompted it to lower refinery runs as the disruption at the secondary unit affects crude throughput. South Korea imports naphtha as domestic supplies are insufficient to meet demand. This has affected sentiment, which a week ago was weighed down by concerns of additional supplies coming from three new condensate splitters in Singapore and South Korea.