Naphtha cracks at one month low, prices likely to dip further as excess supply exceeds demand

18-Jun-13

Open-spec H1-August prices fell by US$4-5/ton from Monday to US$879.50-882.50/ton CFR (cost & freight) Japan on Tuesday because of overnight losses in crude futures, ICIS data showed. Naphtha prices in Asia may slide further on the back of a regional supply glut and modest demand from crackers. Also, naphtha crack weakened to a one-month low of US$88.03/ton against Brent crude futures at the close of trade on Monday, down by 2.4% from 14 June- with naphtha spread at its weakest levels since 16 May. The naphtha market is oversupplied from H2-June to July. Additionally, ethylene margin in northeast Asia based on naphtha feed dropped by US$5/ton in the week ended 14 June to US$116/ton. Notwithstanding stable-to-firmer cracker run rates, the naphtha market collapsed under pressure with a glut of deep-sea inflows from Northwest Europe, the Mediterranean, Russia and USA. Some of the supposedly June-arrival arbitrage material has already been pushed over to July, and this highlighted the glut in the market.