Asian naphtha fell on Tuesday, although its spread against Brent crude held firm at a five-month high of nearly $110 a tonne for late January in the wake of tight supply amid healthy demand, traders said.
Benchmark open-spec, second-half January naphtha was valued at $582.50 a tonne, on a cost-and-freight (C&F) basis, versus $590.75 on Monday. The time spread in the second halves of January and February was quoted at a steady $2.50 backwardation.
Brent/naphtha crack spread for second-half January steadied at $108 from a day earlier, supported by three window deals for first-half February: one from BP to Itochu at $581, another from BP to Mitsui Tokyo at $581 and the third from Glencore to Mitsui Tokyo at $579.50, down from $591.00 traded on Monday.
Despite $81 million losses in naphtha trading by Mitsui's Singapore unit, announced on November 21, either Tokyo-based Mitsui Co & Ltd or Mitsui Oil Asia Hong Kong has been trading naphtha steadily in the window. Mitsui said at that time that its Singapore unit had closed all positions in futures.
"The Tokyo headquarters used to trade in the paper in terms of hedging, and the current trades by Tokyo and Hong Kong offices must have been made for hedging for their physical positions," a source close to the company said. "But I don't think the scale of Mitsui's trades in the paper would be as much as before."
Noting the market tightness, naphtha traders are awaiting results of the tenders by India's Haldia Petrochemicals Ltd to buy 50,000 tonnes of naphtha for January delivery and by Indian Oil Corp to buy a maximum of 240,000 tonnes for December 2006 to March 2007 to supply the Dabhol power plant.
Industry sources said the results would be available on Wednesday at the earliest. In South Korea, SK Corp has shut down its 620,000 tonnes per year No 2 naphtha cracker from December 1 until December 12, a longer-than-expected maintenance, which may ease the firm naphtha market slightly, traders said. For gasoline, Vitol sold one 92-octane parcel to Morgan Stanley for December 31-January 4 at $66.00 a barrel, down from $67.10 agreed in a deal on the previous session.
Taiwan's Chinese Petroleum Corp (CPC) is still negotiating with bidders to sell a 30,000-tonne cargo of 92-octane gasoline for January loading, an industry source said. Taiwan's Formosa Petrochemical Corp, has restarted its 73,000 barrels per day gasoline-making residual fluid catalytic cracker (RFCC). The shutdown would likely have an impact on one cargo of gasoline exports at around 250,000 barrels in January, a company source said.
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