NEW DELHI: Naphtha arrivals to Asia from the West will likely fall again in June after logging a brief Russia-driven increase in May, as the arbitrage window remains shut for a third straight month, traders and analysts said.
A contraction in price difference between East and West closes opportunities for arbitrage for Western traders, limiting their East-bound exports.
June naphtha cargoes into Asia from Northwest Europe, the Mediterranean, the US and Russia are expected to total around 1.1 million tonnes, down from 1.2 million tonnes in May, data from traders and Refinitiv Oil Research showed, mainly due to lower supplies from Europe.
While Russian supplies could dip, they will still account for nearly half of imports into Asia next month. Russian exports will total 500,000 tonnes of overall arrivals next month, down from 570,000 tonnes in May, according to Refinitiv Oil Research. High availability of Russian naphtha and subpar petrochemical demand due to a slowing global economy could keep naphtha margins depressed next month.
Refiners’ profit on making naphtha have fallen nearly 21% to about $17 a tonne so far this year. Naphtha is used in industries such as pharmaceuticals, toys and paints.
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