Naphtha Premiums In Middle East Spikes On Demand From Asia

Naphtha premiums in Middle East spikes on demand from Asia

17-Nov-16

The past week has seen Middle Eastern FOB naphtha premiums improving towards double digits on strengthening Asian winter demand and the return of petrochemical plants from maintenance, as per traders in Platts. Supplies in the Middle East are curtailed by the scheduled shutdowns at Saudi Arabia's Yasref and Ras Tanura refineries in November and December, though this could be partially offset by the start-up last month of Qatar Petroleum's Laffan Refinery 2, that can process 146,000 b/d of condensate, they said. "Demand is better in the first quarter," one trader said. "So the western arbitrage [supply] has increased. This is good for market balance."

The recent market rebound from months in the doldrums due to oversupply, has encouraged traders to work on bringing in cargoes from the Mediterranean or North Africa to Asia, which would arrive in January, they said. Kuwait Petroleum Corp. last week sold by tender 24,000 mt of light naphtha and 50,000 mt of full range naphtha to Japanese trader Idemitsu at a premium of around $10/mt to the Mean of Platts Arab Gulf naphtha assessments on a FOB basis. One source said the premium could be more than US$10/mt, though this could not be confirmed.
Before this, S&P Global Platts assessed the premium at US$7/mt to the MOPAG assessments, up from a discount of US$6/mt over August 11-18, the lowest Middle East price differential since November 21, 2008, during the depths of the global financial crisis, Platts data showed.

India's Mangalore Refinery and Petrochemicals Limited also sold to Trafigura last week, a 35,000 mt lot of naphtha with minimum 75% paraffin content for early December loading from New Mangalore on India's west coast, at a premium of around US$13/mt to MOPAG naphtha assessments, FOB basis, much higher than its last export for end-November loading at a premium of around US$6/mt, a source said.
The recovery is also reflected in the premiums fetched by Middle Eastern producers in term contracts for 2017 in recent weeks, though the latest premiums were much weaker than those for past years. KPC early last month concluded FOB term contracts with Asian end-users and traders for its December 2016-November 2017 naphtha cycle at a premium of US$4/mt to the MOPAG naphtha assessments for full range naphtha and US$5/mt for light naphtha, sources had said.
The premiums were the lowest since November 2008 when KPC and term lifters had sealed contracts for December 2008-November 2009 supplies at a US$2/mt premium to the MOPAG assessments, Platts data showed.

Around a month later, the UAE's Abu Dhabi National Oil Co. and term lifters agreed on contract premiums for the January-December 2017 naphtha cycle, with the splitter grade at $6/mt above the ADNOC formula, which takes the average of FOB Arab Gulf naphtha assessments by S&P Global Platts and Petroleum Argus. The term premiums for paraffinic naphtha were sealed at US$8/mt, low sulfur naphtha loading from Ruwais Refinery-East at US$7/mt, and low sulfur naphtha from Ruwais Refinery-West at US$6.50/mt, trade sources said. Though better than those fetched by KPC, ADNOC's premiums were about 50% under the current January-December 2016 contracts. The other ADNOC cycle -- for July 2016 to June 2017 -- had also earlier been agreed at a $12/mt premium for splitter naphtha, sources had said.