Naphtha cracks in Asia rise to two-week high

22-Aug-16

Asia's naphtha cracks for front-month H1-October jumped 68.5% last Thursday to a two-week high of US$26.8/ton as recent spot and term demand supported the market, as per traders in Reuters. Formosa sought term cargoes for 2017 after it locked in more than 100,000 tons of spot cargoes for second-half September arrival at Mailiao last week at deep discounts of more than US$16/ton to Japan quotes on a cost-and-freight (C&F) basis.
But the results of its term tender were not known. Traders said at least one other North Asian buyer could be aiming to lock in term cargoes to cash in on the low prices but this could not be independently confirmed. But overall, the high supplies are expected to persist through 2016 and the current crack value was still sharply below the US$82/ton level seen during the same period last year.

India's Oil and Natural Gas Corp (ONGC) sold to Vitol 34,500 tons of naphtha for September 10-11 loading at a discount of US$5.50/ton to Middle East quotes on a free-on-board (FOB) basis, which made this a fresh six-year low. Bahrain Petroleum Co (Bapco) has offered 50,000 tons of naphtha in the spot market in a rare move as the refiner usually ties up most of its fuel through long-term tenders. The spot cargo is scheduled for October 1-4 loading through a tender closing on August 19. It stated in its document that there could be two rounds of negotiations to get the highest bids. Traders said term premiums, negotiated months ago, now looked completely out of synch with the market where spot prices were all at discount levels as heavy supplies persisted, as per Reuters.