Asia’s naphtha cracking margins NAF-SIN-CRK jumped nearly five times this year to above $100 per metric ton on supportive prompt demand and persistently tight supplies, which will likely continue into early 2024.
Supply deliveries for the petrochemical feedstock have been limited in the past month due to weather-related disruptions and some planned refinery maintenance. Worries about deliveries from Europe via the Red Sea amid the Israel-Palestine conflict contributed slightly to the supply tightness as well.
Demand has been upbeat even at the year-end as most naphtha crackers returned from maintenance and inventories were low for most of them, given the weak production spreads throughout the year. Buying will likely be robust for February arrival lots as a handful of crackers are intending to keep run rates at between 75% and 90%, two sources said.
However, activity from the gasoline blending sector will likely be curtailed due to weak margins.
Gasoline refining margins GL92-SIN-CRK closed slightly higher year-on-year at nearly $10 a barrel, as a reflection of some unexpected tightening of supplies despite a seasonal lull in the West from driving demand and a contango market structure in the U.S., where prompt prices were lower than forward delivery prices.
Some maintenance plans in the West and the Middle East may provide support going into early 2024, several trade sources say, but the ready spot supply from northeast Asia – especially China – could slightly offset the impact of this.
Demand could be the key driver ultimately as it will depend on how many buyers need to shortcover their requirements from the spot market amid these production outages and weak reforming margins for gasoline blenders at this point in time, one blender said.
NEWS
– OPEC is facing weakening demand for its crude in the first half of 2024 just as its global market share declines to the lowest since the Covid-19 pandemic on the back of output cuts and member Angola’s exit, according to Reuters calculations and data from forecasters.
– Oil prices are set to end 2023 about 10% lower, the first annual decline in two years, after geopolitical concerns, production cuts and global measures to rein in inflation triggered wild fluctuations in prices.
INVENTORIES
– U.S. crude and gasoline inventories fell by more than expected last week on strong exports, while distillate stocks rose, the U.S. Energy Information Administration said on Thursday.
– ARA gasoline stocks dropped by 6.5% in the week to 919,000 tons due to strong exports to West and East Africa.
Source: Reuters (Reporting by Trixie Yap; Editing by Subhranshu Sahu)