Asia naphtha markets to stay buoyant on consistent demand, tight supply

SINGAPORE (ICIS)–Asia naphtha markets are
poised to draw support from a combination of
steady downstream demand and potentially
crimped supply on reduced deep-sea western
cargo flows.

Demand and supply dynamics were seen as
relatively balanced, with consistent demand for
petrochemical production lending market

Depending on the grade, light naphtha demand
for downstream olefins production is expected
to stay healthy. This coincides with snug
supply availability on the back of reduced
upstream refinery run rates and arbitrage flows
to the east that are anticipated to be lower.

A string of hurricanes in the US has curtailed
production and firmer freight costs may well
deter deep-sea cargo flows to Asia, if not

Market expectations of lesser arbitrage naphtha
arrivals from Europe this month could also keep
supply in check.

Taiwan’s Formosa Petrochemical (FPCC) is likely
to float a tender in the coming days to buy
spot naphtha for second-half November arrival.

FPCC had
recently purchased
heavy full-range
naphtha, coinciding with limited supply
availability of light naphtha, owing to a
planned turnaround at a secondary unit at its
540,000 bbl/day Mailiao refinery in

The firm
paid a premium
at around $5.00/tonne to
spot CFR Japan quotes for first-half November
supplies of open-specification grade naphtha.

Healthy downstream ethylene margins offered
greater feedstock buying incentive for
northeast Asia producers at least.

On a CFR (cost and freight) Japan basis, spot
prices for second-half November delivery
naphtha averaged at around $408/tonne at the
early hours session on Thursday. Prices are at
a two-week high, hovering at just above the
$400/tonne mark.

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Naphtha’s crack spread has held relatively firm
at above $80/tonne, having closed at
$88.75/tonne on 7 October, up from $71.50/tonne
at the start of September.

On the flip side, uncertainty in upstream crude
oil markets and lingering demand concerns over
the coronavirus pandemic could temper the
upbeat sentiment.

ICE Brent December crude oil futures were at
$42.00/bbl after US President Donald Trump
dashed hopes for a stimulus package and a rise
in crude oil inventories.

Asia naphtha’s intermonth time spread for the
second half of November and the second half of
December stood at a smaller backwardation of
$2.50/tonne compared with the $4.50/tonne
spread a month earlier, ICIS data shows.

Image: Naphtha can be used as lighter fuel.
Photo by Tahir Ikram

Focus article by Melanie Wee



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