Asia’s naphtha intermonth price spreads flipped to a contango for the first time since September as overall lacklustre buying interest from end-users prevailed.

The prompt month-forward month contango was valued at $4 per tonne, compared with a backwardation of $2 per tonne a day earlier.

Tepid demand persisted from some cracker operators mulling their run rates entering the end of the first quarter for 2023, with average cracker run rates still hovering at 70-80% in Asia.

The market was further weighed on by consideration among naphtha buyers to procure downstream petrochemical derivatives instead of naphtha, given the potentially better economics especially on the ethylene front.

Decreases for prompt month prices were cushioned by the potential of sporadic demand emerging as a handful of buyers were not lifting large contractual volumes and may still need to buy second-half February spot parcels.

However, naphtha cracks (NAF-SIN-CRK) closed the trading session firmer at $26.43 per tonne, with oil futures dropping at a quicker pace.

Gasoline cracks (GL92-SIN-CRK) extended gains to $7.29 a barrel, despite weakness in fixed price discussion levels, as some potential arbitrage discussions to the U.S. emerged as the window was slightly open for these few days, according to two participants.

Regional buying interest in Southeast Asia however remains stifled, capping overall margin gains.

INVENTORIES

– Singapore’s onshore stocks of light distillates dropped 1.367 million barrels to 14.452 million barrels in the week to Dec. 28, Enterprise Singapore data showed.

– U.S. gasoline inventories registered an rise in line with expectations of about 510,000 barrels, market sources said.

NEWS

– Oil prices dipped on Thursday as surging COVID-19 cases in China dimmed hopes of a recovery in fuel demand for the world’s largest crude oil importer.

– U.S. oil major Exxon Mobil Corp XOM is suing the European Union in a bid to force it to scrap the bloc’s new windfall tax on oil groups, arguing Brussels exceeded its legal authority by imposing the levy.
Source: Reuters