Naphtha exports from Europe to Asia could reach zero levels in June

02-Jul-10

There may be no shipments of naphtha from Europe to Asia in July, akin to the supply scenario in March 2010. Naphtha forward prices are slated to get more expensive than those for prompt delivery for the first time in 8 months, since naphtha exports from Europe to Asia may plunge as demand from Chinese chemical producers slows. Naphtha shipments from Europe to Asia were estimated at 500,000 tons in May and 300,000 tons in June and 500,000 tons in May. Naphtha imports have fallen in China as pace of economic growth slows down. Naphtha prices at levels of US$650/MT CFR Japan, have seen the largest decline this quarter, since the quarter ended September 2009. Cargoes for prompt delivery in Northwest Europe were trading at US$638/MT, the lowest since June 8. Additionally, naphtha production in Asia and the Middle East has risen as refiners resumed operations after maintenance shutdown. Japan’s Cosmo Oil Co. has started a crude unit at its Chiba refinery after 40 days, while Kuwait National Petroleum Co. is scheduled to resume production at refinery units in Mina Abdulla. Europeans are not keen to export to Asia, as at the prevalent pricing levels in Asia, European refiners will struggle to make a profit - The price difference between the two regions is about US$13/ton, compared with the approximate US$20/ton it costs to charter a tanker to carry 80,000 tons of naphtha. Europe hopes to ship the 300000-500000 tons of surplus naphtha to USA to be converted to gasoline to meet increased fuel demand in the holiday driving season.