Naphtha crack in Asia rises to three-week high

19-May-16

Naphtha crack in Asia extended gains to reach a nearly three-week high of US$62.6/ton on Wednesday, lifted by steady demand from South Korea and low volumes of Western cargoes coming to the East next month, as per Reuters. YNCC bought naphtha for H2-June delivery to Yeosu. Details of volumes and prices were not immediately clear, but traders estimated the levels to be around US$4-5 below Japan quotes on a cost-and-freight (C&F) basis, in line with most of the recent purchases from South Korea for cargoes delivering in second-half June. Since late April to now, South Korea has bought at least 500,000 tons of naphtha through tenders from the spot market for June delivery. But a slight increase in demand for June cargoes from South Korea versus May was not enough to overturn a market filled with supplies due to recent high refinery runs, lower spot requirements from Taiwan and Japan and an unusually weak gasoline market, traders said. These key factors kept spot prices on a C&F basis at discounts although levels have narrowed from a steep $8 a tonne for cargoes delivering to South Korea in second-half April. The weak fundamentals have also shut out most of the Western cargoes. About 1 mln tons of Western naphtha are set to arrive in Asia in June, the lowest monthly arbitrage volumes in over 2-1/2 years. "Despite the low arbitrage cargoes, I doubt the market will be seeing any swift improvement (for sellers)," said another source based in Singapore.