Asia’s naphtha crack extended gains on Monday, supported by demand from new crackers and expectations that run cuts by Chinese plants that rely on U.S. liquefied petroleum gas (LPG) imports may prop up petrochemical margins, traders said.
Refiners’ margins for producing naphtha (NAF-SIN-CRK) against Brent rose $4.05 to $74.03 a metric ton, the highest since April 4, after hitting a multi-month low last week.
Chinese operators of propane dehydrogenation (PDH) units that buy $11 billion worth of U.S. LPG annually are poised to cut output or shut for maintenance in coming weeks as Beijing’s retaliatory tariffs on U.S. imports drive up costs, industry insiders said.
Armaan Ashraf, global head of natural gas liquids at consultancy FGE, said tariffs could force Chinese PDH operators to cut average operating rates by nearly 15 percentage points and curb demand for propane from steam crackers and PDH plants by at least 500,000 metric tons per month.
A decline in China’s output may help ease oversupply and support petrochemical margins, traders said.
However, concerns about U.S. tariffs weakening global demand for consumer goods made from petrochemicals weighed on naphtha’s outlook.
Meanwhile, gasoline crack (GL92-SIN-CRK) slipped as worries of global economic slowdown amidst trade wars persist.
“Gasoline demand will also take a hit when people tighten their purse strings on recession worries,” one of the traders said.
NEWS
– China’s crude oil imports in March rebounded sharply from the previous two months and were up nearly 5% from a year earlier, data showed on Monday, boosted by a surge in Iranian oil and a rebound in Russian oil deliveries.
– Iran and the U.S. said they held “positive” and “constructive” talks in Oman on Saturday and agreed to reconvene next week in a dialogue meant to address Tehran’s escalating nuclear program, with President Donald Trump threatening military action if there is no deal.
– Goldman Sachs expects oil prices to decline through the end of this year and next year because of the rising risk of a recession and higher supply from the OPEC+ group.
SINGAPORE CASH DEALS
PTT sold 100,000 barrels of 97-octane gasoline for May 4-8 loading to Gunvor at $74.30 a barrel.
Source: Reuters