SINGAPORE: Asia’s naphtha and gasoline cracks rose for a sixth straight session on Tuesday, scaling fresh highs on signs of recovering demand and shrinking supplies. But the gains could be capped by soaring crude oil prices and the resulting rise in fuel costs that could dampen consumer demand, trade sources said.
Naphtha crack climbed to $130.88 on Tuesday, up from $127.58 per tonne on Monday and its highest since December 2017. Expectations of rising demand from refiners in South Korea and China as new cracking capacities are brought online have helped lift naphtha margins higher, trade sources said.
“Furthermore, a spike in prices of rival cracker feedstock liquefied petroleum gas is likely to spur petrochemical producers to maximize naphtha in the feedstock slate,” Refinitiv Oil Research said in its latest weekly flows report. Total naphtha flows into Asia for July have been provisionally assessed at 6 million to 6.5 million tonnes, according to assessments by Refinitiv Oil Research. The volumes are up from a June forecast of 5.8 million to 5.9 million but steady-to-higher versus the year-to-date monthly average of about 6.15 million tonnes, according to the assessments.
The gasoline refining margin also climbed to a fresh high of $9.35 a barrel on Tuesday, the highest since February 2020 and up from $9.10 per barrel in the previous session.
The rising margins came amid surging crude oil prices, which hit multi-year highs on Tuesday after OPEC+ producers fell out over plans to raise supply in the face of rising global demand. Crude oil buyers in Asia are concerned that an unexpected cancellation of an OPEC+ meeting to discuss a rise in output could drive oil prices even higher and hurt their margins.
Overall refining margins in Asia, which have recently firmed on the back of rising gasoline cracks, may be short-lived, says data analytics firm Vortexa.
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