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Naphtha C+F Japan Cargo: Jan. 2 - Mar. 19, 2013

Naphtha C+F Japan Cargo: Jan. 2 - Mar. 19, 2013

Despite uptick in crude prices, naphtha prices continue to sag

Despite an uptick in crude prices, naphtha prices continued to sag March 19 on the back of weaker demand from end-users.

The benchmark CFR Japan naphtha assessment was down $2.25/mt at $909/mt, while the assessed first-half May/first-half June spread fell $1/mt to be assessed at $20/mt.

Commentary continue below...

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This follows weakness in the European market, which saw an overnight decline of 55 cents/mt in the April Northwest Europe crack, and another fall of 10 cents/mt to minus $9.25/mt during the Asian trading session. During the Platts Market on Close assessment process, Sietco lifted Glencore’s offer for a CFR Japan H2 May cargo at $913/mt.

Glencore had lowered its offer steadily from $928/mt at the start of Platts MOC, against Sietco’s starting bid at $907/mt.

Concurrent weakness in both the West and East naphtha markets have made it difficult to realize arbitrage volumes, said a trader. “Asia’s cracker margins have worsened. This means demand [for naphtha] will shrink due to crackers cutting runs and using [cheaper alternatives like] LPG.”

The spread between ethylene CFR Northeast Asia and benchmark MOPJ physical naphtha averaged minus $10.38/mt for the week ending March 19 -- a stark contrast to an average of $79.44/mt the week before, Platts data showed.

A narrower ethylene/naphtha spread suggests lower profits for petrochemical producers. Despite the bleak trading sentiment, there were others who pointed out some strength might be drawn from demand for motor gasoline blending.

“I guess the April [CFR Japan] market was over supplied due to the rollover of naphtha feedstock and cracker rate cuts but for May and June markets, it looks like supply will be short due to the lack of arbitrage cargoes and a strong gasoline market,” said a North Asia-based trader.

The East/West spread was heard to have narrowed from $12.75/mt at the start of Asian trading hours to $12.25/mt at its close (0830 GMT).

According to Platts data, the reforming margin, which measures the spread between 92 RON mogas and FOB Singapore naphtha, widened to an average of $17.86/mt for the week ending March 18, as compared to $18.07/mt the week before.

A wider spread indicates a relatively firmer mogas margin as compared to that of naphtha’s and this may result in fewer naphtha export volumes from refineries looking to maximize profits.

“Yes, it [mogas margins] is getting better ... and when it is doing well, [India’s] export volumes will decrease,” said a trader.

That said, current estimates are that Indian export volumes would hold steady or edge up from the 750,000 mt seen for March loading naphtha cargoes, as Reliance and BPCL are expected to return from refinery maintenance.

“In general, we can expect export volumes in the second quarter to increase from Q1, but that also depends on the reforming margins of gasoline,” said a trader.

Additional Asia oil price charts:

Gasoil FOB Singapore Cargo
Fuel oil: FO 180, 380 CST 3.5%S FOB Singapore Cargo
Gasoline Unl 92 FOB Singapore Cargo
Jet Kerosene FOB Singapore Cargo
MTBE FOB Singapore

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