Asia’s naphtha refining margins (NAF-SIN-CRK) firmed further to around $20 a tonne, reflecting the emergence of buyers in the market despite slightly narrower production spreads for crackers.
The market finally snapped a month-long streak of no deals, with one second-half July cargo changing hands.
There were some deals from South Korea and Japan in line with earlier expectations, with KPIC buying at least 40,000 tonnes of light naphtha for end-June or July delivery at a discount of $20 a tonne to Japan quotes. The material is likely to load from commercial tanks in Southeast Asia.
Mitsui Chem also sought for July arrival spot lots, with some talks of deals at flat to Japan quotes but further details could not be confirmed.
Buyers mostly stayed by the sidelines to wait for a clearer direction after naphtha prices remained above $600 a tonne, bearing in mind the narrowing of olefins production spreads at the same time.
Separately, a portion of demand for naphtha may continue from the gasoline blenders, given the healthy reforming margins these two days, one trader said, adding that this could limit any short run price weakness.
However, one source said that demand from this sector could be limited depending on the different type of octane blends since costs for other octane boosters in the market remain high.
Asia’s octane 92 cracks (GL92-SIN-CRK) fell slightly tracking some weakness in the U.S. gasoline futures and mixed outlooks from industry sources.
A portion of the market remained cautious on fundamentals, with the expectation that supply remains sufficient to cover the summer driving season.
However, some remained confident that stocks in Asia can be depleted soon if the arbitrage spreads continue to widen, with expectations that fewer Northwest Europe cargoes will head to the U.S. after May.
Demand is still strong from the U.S. especially given the lack of gasoline blending components now because of the unexpected refinery outages, said one trading analyst.
INVENTORIES
– Singapore light distillate stocks rose by 281,000 barrels to a two-week high of 16.091 million barrels in the week to May 24, Enterprise Singapore data showed.
– U.S. crude oil and distillate inventories fell unexpectedly last week as imports declined, while gasoline stockpiles dropped more than forecast, the Energy Information Administration said on Wednesday.
Gasoline stocks (USOILG=ECI) also fell by a more than expected 2.1 million barrels in the week to 216.3 million barrels, the EIA said.
NEWS
– Oil prices fell on Thursday after Russian Deputy Prime Minister Alexander Novak played down the prospect of further OPEC+ production cuts at its meeting next week.
– Novak said on Thursday he expected no new steps from the OPEC+ group of oil producers at its meeting in Vienna on June 4, Russian media reported, after the group announced a significant output cut earlier this year.
– Japanese ethylene production in April rose 13.2% from the same month a year earlier to 449,100 tonnes, data from the Japan Petrochemical Industry Association showed on Thursday.
SINGAPORE CASH DEALS
– One naphtha deal, one gasoline deal.
Source: Reuters