Asia's naphtha closed at its highest in over three months as crude oil benchmarks and demand steadied despite that the supply is set to stay adequate in the short term.
The ICIS data showed that for the first-half May delivery on Thursday, Spot open-specification naphtha prices reached $575.25 per tonne based on cost and freight (CFR) Japan basis. The price marks a $21.25 per tonne increase from the levels last week.
The ICIS data also showed that prompt-month naphtha spot prices were last this high in early November 2018 averaging at $576.50 per tonne CFR Japan. Crude oil futures gained strong at above $60/bbl as the oil supplies in the United States tightened lifting sentiments as a whole. ICE Brent May crude oil futures closed at $68.50/bbl which helped drive up the prices of petrochemical feedstock naphtha. Typically, naphtha tracks the movement of Brent crude futures.
Naptha's high price spread ICE Brent crude oil futures as it closes high for the first time since early-January levels have gone above $60 per tonne as $63.93 per tonne on March 20.
Naptha's crack spread stood at $55.55 per tonne last week. The increase in the quantity of end-user buying helped absorb supply that is perceived as sufficient. Recently, South Korea's Yeochun NCC (YNCC) gained seven parcels of 25, 000 tonnes for its delivery to Yeosu at a premium of mid-$3.00 per tonne levels to spot CFR Japan quotes.
Formosa Petrochemical, a Taiwanese firm, and Hanwha, a South Korean Firm, ensured their usual 100, 000-tonne intake of spot naphtha cargoes for their second half of April delivery. The demand for petrochemicals production could be tempered as a result of scheduled cracker turnarounds while downstream olefins margins are generally healthy.
The Hanwha Total Petrochemical of South Korea is scheduled to pause the operation of its Daesan cracker on late March for maintenance schedule which is expected to raise the cracker's ethylene capacity.
Large volumes of arbitrage naphtha arrivals are expected to add to the supply surplus in the Asian Region. The estimates of the traders project that around 2 million tonnes of western naphtha will reach Asia this month at an average that is higher than the monthly volume of 1.5 million tonnes.
According to reports, Asia's Natha is expected to increase by 7.8 percent reaching $56.33 per tonne on Thursday. It is the highest peak for naphtha since December 28 which is supported by high demand.
