Asian naphtha prices fell on Tuesday due to an extended decline in crude prices, while the inter-month backwardation widened slightly with naphtha demand expected to increase in months ahead.
The key open-spec naphtha contract for the second half of May was notionally assessed at $682.50 a tonne on a cost-and-freight (C&F) basis, down from $690 late on Monday. The backwardation widened between the second halves of May and June by 50 cents to $9.50 a tonne.
The ICE Brent/naphtha crack - the premium paid for naphtha compared with Brent crude prices - held steady for the second half of May at $181 a tonne. Demand for naphtha from Asian petrochemical end users is projected to rise as South Korea's LG Chem Ltd has boosted the run rates of its recently expanded naphtha cracker to 70 percent. Taiwan's Formosa Petrochemical's 1.2 million tonnes per year (tpy) cracker is also set to start operations next month.
But there was little concern of supply shortages as higher demand is offset by a recovery in refinery run rates and Indian naphtha exports and some arbitrage cargo flows from the rest of the world, said a trader.
Japanese refineries had curbed their output throughout the winter amid unusually mild winter weather and sluggish demand especially for heating fuel kerosene. May ICE Brent crude was up 27 cents at $66.86 a barrel, after settling down $1.65 on Monday. April Singapore naphtha swaps were valued at $73.40 a barrel, down from $74.65 on Monday.
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