Asia naphtha falls below $500/tonne on supply glut, oil price slide

Asia’s naphtha prices extended their downward spiral on the back of weakening oil prices and a persistent supply glut, as cargo deals fetch deeper discounts.

Open-specification naphtha prices for second-half July delivery stood at $467.25/tonne CFR (cost & freight) Japan in the morning session on Monday.

Spot prices were down by some 7% from the closing in Asia on 31 May, ICIS data showed.

The price fall comes on the back of losses in global crude oil benchmarks. Prompt-month ICE Brent crude oil futures settled lower at $60.97/bbl as trade wars heightened concerns about a global economic slowdown.

Asia’s naphtha markets grapple with a lingering supply overhang amid heavy western arbitrage flows estimated this month.

Naphtha’s crack spread, measuring naphtha refining margins, was mostly down in the previous week, with the Asia close on 30 May at a six-month low of $10.93/tonne.

Reflecting bearish market fundamentals even as there were pockets of demand, spot cargo transactions were done at lower prices in discounts as opposed to premiums they commanded before.

Taiwan’s Formosa Petrochemical (FPCC) has secured some 100,000 tonnes of open-spec naphtha cargoes for delivery to Mailiao in the first-half of July, at a discount of around $4.00/tonne to its pricing formula.

The price was in stark contrast with FPCC’s earlier purchase of 1-10 June supplies, in which the firm forked out a premium near $5.00/tonne to its pricing formula.

South Korea’s Yeochun NCC (YNCC) had earlier bought H1 July naphtha at a steeper discount than its previous purchase of second-half June supplies.

In India, naphtha for export similarly fetched lower spot differentials.

Bharat Petroleum Corp Ltd (BPCL) was understood to have sold a 35,000-tonne cargo scheduled for 16-17 June loading from the port of Kochi, at a high single-digit premium to its own pricing formula on an FOB (free-on-board) basis.

The refiner’s earlier sale of the same volume for 15-16 May loading from the same port, fetched a higher premium near $13/tonne to its own pricing formula.