Asian naphtha cracks NAF-SIN-CRK and prices NAF-1H-TYO both slipped week-on-week amid cautious demand outlooks, despite some ongoing February discussions ahead of the holiday season and seller unwillingness to offer lower prices.
Some fresh offers for light naphtha were at premiums above $40 on a cost & freight southeast Asia basis to Japan quotes for end-January or February arrival.
Sellers were unwilling to let go of their cargoes at cheaper prices given the ongoing prompt supply tightness.
“The (intermonth) spreads have remained strong for January-February amid concerns about the lack of supply in Asia in the near term, which could worsen due to maintenance in the AG early next year,” said Sparta Commodities’ analyst Jorge Molinero.
Market expectations on supplies from West varied, with a handful of buyers still hopeful that the east-west flow can be viable again for end-February or March arrivals here.
Some buyers were hesitant to pay at such levels, given squeezed production spreads and some cautiousness overall in downstream demand expectations. At least two crackers in southeast Asia will cut runs to 75%-80% for January next year, compared with the 80%-85% in December.
However, the market’s softness was mitigated by a second pool of both end-January and February buyers who could afford to buy some of these spot lots due to last minute requirements and possibly low stockpiles on their end. Minimal term obligations also forced some buyers out into the spot market, which also buoyed spot market premiums.
Gasoline cracks GL92-SIN-CRK and prices GL92-SIN also softened week-on-week, with a mixed bag of demand-supply outlooks countering a downtrend in cash premiums. Both price indexes closed at the l on Friday.
A portion of the market was still bearish on demand-supply fundamentals, given slowing regional demand and overall strong expectations of ample China-origin export volumes to emerge for January soon.
Overall market weakness was capped by lingering supply concerns – given the further delays in the restart timings of gasoline-producing units, with at least three Asian units likely to only be back online with stable production between end-December and early January.
Uncertainty on how the Red Sea shipping situation will pan out, which could open the arbitrage between Singapore and the Middle East ahead of the maintenance season, also underpinned cracks mid-week.
While the U.S. supply situation looks ample, market participants are not expecting export flows to be readily available given logistical constraints, further capping weakness.
The pressure on Asian prices in the near term may also end up opening the arbitrage to other regions soon, which will put a stoppage on price falls soon, one trader said.
NEWS
– China will promote stable domestic crude oil production at 200 million metric tons per year, equivalent to 4 million barrels per day (bpd), according to a report from CCTV, citing National Energy Administration Director Zhang Jianhua on Friday.
– Angola said on Thursday it would leave OPEC, in a blow to the Saudi-led oil producer group that has sought in recent months to rally support for further output cuts to prop up oil prices.
– Oil prices rose as much as 1% on Friday as tensions persisted in the Middle East following Houthi attacks on ships in the Red Sea, although Angola’s decision to leave OPEC raised questions over the group’s effectiveness in supporting prices.
SINGAPORE CASH DEALS O/AS
– Two gasoline deals, no naphtha deal.
Source: Reuters (Reporting by Trixie Yap; Editing by Sonia Cheema)