Naphtha cracks drop below US$100/ton

06-Jun-11

Asia's naphtha price ended on Friday at the lowest in 1-1/2 weeks while cracks fell below US$100/ton for the first time in about eight months as demand fell and a shut reversed arbitrage window dented confidence, as per Reuters. Russia is imposing a 90% tax on all light-end exports in a move to deal with a domestic gasoline shortage. Markets are concerned about the fall in Russian naphtha exports in the long-run. Japan's JX Nippon Oil & Energy Corp plans to shut its 404,000 tpa Kawasaki naphtha cracker on June 18 for repair work and the unit is expected to resume operations on June 22. Despite the brief duration of the outage, it is ill timed for sellers as it comes amid lost of demand from Taiwan’s Formosa that has shut a 700,000 tpa No. 1 cracker following a fire at a pipeline on May 12. Its two other crackers with a total nameplate capacity of 2.23 mln tpa are running at reduced rates of 85% capacity. Due to the sudden demand disruption, prompt supplies are long but the market is not oversupplied. However, an attempt will have to be made to bring some of the cargoes out of the region to the West. However, limited opportunities for westbound cargoes from the Gulf/Mediterranean were adding to the sellers' woes. The price for front-month H2-July eased $to US$957.25/ton, it’s lowest since May 23. Naphtha cracks fell to US$97.08/ton premium, lowest since Sept. 24 2010.