Asian naphtha crack slips at six-year low

Asia's naphtha crack slipped 1.1 percent to a five-session low of $138.85 a tonne on Thursday due to the year end lull, but the crack value was more than four times the value seen a year ago. The overall 2015 average crack however ended at $92.43 versus 2014's average of nearly $120 a tonne. This year therefore also marked the lowest yearly average since 2009 as a sluggish start in January 2015 and massive supplies arriving from the West in the third quarter had dragged on the crack.
Despite the low crack level, naphtha's performance has surpassed some of the traders' expectations this year as they had previously anticipated large amount of alternative liquefied petroleum (LPG) gas feedstock replacing the fossil fuel. LPG, also used for heating, can replace 5 to 15 percent of naphtha in some of the Asian crackers. But high prices of LPG for most of this year have prompted buyers to rely mostly on naphtha.
Some traders had also expected Abu Dhabi National Oil Co (ADNOC) to sharply raise exports as it had more than doubled its Ruwais refinery capacity to over 800,000 barrels per day. But technical problems had delayed high runs at the refinery. "It has been a good year for naphtha although gasoline is the best (among all oil products)," said a Singapore-based trader. "I expect a strong light distillates products market in 2016," he said, adding that the strength would be from gasoline. "Low flat gasoline prices will drive demand for motor fuel," he said.
GASOLINE The average 2015 Asia's gasoline crack in contrast to naphtha ended at $12.50 a barrel, highest in more than six years, thanks to strong demand globally. Going forward, demand for gasoline in Asia is forecast to grow 4 to 5 percent next year to 6.5 million barrels per day (bpd) or slightly more, said energy consultancies FGE and JBC Energy.
Gasoline supply, however, is expected to grow at about 3 percent to 6.5 million to 6.6 million bpd. Trafigura snapped up two 35,000-tonne cargoes from India's Bharat Petroleum Corp Ltd (BPCL) at an average premium in the low $20s a tonne to Middle East quote on a free-on-board (FOB) basis. The cargoes are for January 25-27 loading from Mumbai and January 22-24 loading from Kochi. Taiwan's CPC has offered 30,000 tonnes of 92-octane gasoline for February 4-22 loading from Kaohsiung and 9,000 tonnes of reformate for February 6-29 loading from the same port in a single tender due to be awarded on January 8.