The Asian naphtha crack fell to a near 5-1/2 month low of $117.85 a tonne on Monday after a brief recovery in the previous session as sellers grappled with high supplies. Europe, the Mediterranean and the US were expected to pile Asia with supplies in September as the gasoline season has ended in the West. Kuwait's exports for September at 124,000 tonnes so far were at one of its highest this year in a single month, Reuters data showed.
Mounting supplies had worked in favour of buyers. Vitol snapped up 25,000 tonnes of full-range naphtha for prompt late August loading from Kuwait at a premium of about $6 a tonne to Middle East quotes on a free-on-board (FOB) basis, lowest premium the refiner had achieved for cargoes sold this year. This was also half the premium it had recently received for a second-half September cargo sold at $12 a tonne premium.
"It's been a long time since the market has seen a single-digit obtained by Kuwait," said a trader, explaining how the market has tumbled. Kuwait's spot premiums had often hinged on levels at $30 and above for cargoes sold for January to July lifting but the ample supplies have turned the market around.
Premiums in Taiwan had flipped into a discount on August 15 for the first time since September 2013 after Formosa picked up second-half September naphtha at a discount of about $6.00 a tonne to Japan quotes on a cost-and-freight (C&F) basis. The discount level was also the lowest seen in more than 3-1/2 years in Taiwan. The weak market helped draw South Korean buyers out to seek term cargoes, with Korea Petrochemical Ind Co Ltd (KPIC) being the latest to join the bandwagon.
KPIC is looking for at least 100,000 tonnes of naphtha for October 2014 to December 2015 arrival at Onsan in a tender closing on August 18, with offers to stay valid until August 20. YNCC had on August 7 bought about 200,000 tonnes for October 2014 to March 2015 delivery at a premium of $5.00 to $5.50 a tonne.
Lotte Chemical had on August 13 purchased about 400,000 tonnes of naphtha for October 2014 to September 2015 delivery at a premium of about $4.50 a tonne to Japan quotes on a cost-and-freight (C&F) basis. Traders said LG Chem had also likely signed a term deal last week but details were not immediately available. In the Philippines, JG Summit Petrochemical Corp is seeking 30,000 tonnes of second-half September naphtha to feed its cracker, which is in the midst of ramping up runs after a near two-month shutdown, traders said.
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