Naphtha cracks firm up in Asia on demand from South Korea, and Taiwan, Iran concerns

19-Jan-12

Naphtha prices in Asia rose to a 3 session high on Wednesday with cracks reaching a 5 session high on demand from Taiwan followed by demand from South Korea, as per Reuters. Formosa, Honam and YNCC were heard to be seeking volumes. Buyers in South Korea are concerned over the intensifying tensions between Iran and the West, as sanctions against Iran could force refineries to cut runs if they fail to secure alternative supplies. LG Chem bought around 25,000 tons of naphtha for H2-February arrival at Daesan at premiums of about US$8.50/ton to Japan spot quotes on a cost-and-freight (C&F), similar to levels it paid on Jan. 10 for 50,000 tons. Buyers have been keeping their naphtha inventory levels low and they are now concerned that the sanctions could affect supplies ahead. Few buyers are buying additional spot possibly on concerns over the oil market in general and also due to lower nominations of supplies," said a trader. Sellers usually have the discretion to supply 5-10% less or above a contracted volume to a buyer depending on fundamentals and crude oil prices, which were supported by escalating tensions over Iran's nuclear program. Open spec naphtha for front-month H1 March rose to US$952/ton. Naphtha cracks for H1 March rose by over seven dollars to US$115.83/ton premium.