Asia's naphtha inter-month spread was at a slight backwardation on Thursday for the first time since December 16, supported by strong demand and traders' expectations of fewer Western cargoes coming to Asia in February. The spread between second-half February and second-half March was at a 75 cents backwardation. A backwardated market reflects stronger fundamentals as opposed to a contango which typically shows a heavily supplied market.
"The European market is strong currently and that would make it less lucrative for sellers to move the western cargoes to Asia," said a Singapore-based trader. He added that cracker operators would also find it more attractive to ditch alternative liquefied petroleum gas (LPG) in favour of naphtha due to the rising cost of the latter.
As for demand, South Korea's Lotte Chemical had locked in around 100,000 tonnes of open-specification naphtha for second-half February delivery to Daesan and Yeosu at discounts ranging from $1.50 to $2.00 a tonne to Japan quotes on a cost-and-freight (C&F) basis. The purchase came in the same week as those made by SK Energy, Hanwha Total and Chinese trader Unipec, which has bought naphtha for first-half February delivery but the price was not immediately clear.
Asia's gasoline crack was marginally down to a two-session low of $11.02 a barrel but Singapore's cash trades were comparatively vibrant compared to earlier this week. Four trades totalling 200,000 barrels were done in the Singapore market, the highest number of deals done since December 29. Singapore's onshore light distillates stocks, which comprise mostly gasoline and blending components for petrol, in the meantime had edged up about 0.4 percent or 49,000 barrels, to reach a five-week high of 12.4 million barrels in the week to January 4, official data showed.
Kuwait Petroleum Corp (KPC) has offered 25,000 tonnes of full-range naphtha for January 13-14 loading through a tender closing on January 6. India's Hindustan Petroleum Corp Ltd (HPCL) has offered up to 20,000 tonnes of 90-octane grade gasoline, with a 0.15 percent sulphur content, for January 20-27 loading from Vizag through a tender closing on January 6. Bids will stay valid until January 9.
South Korea's S-Oil, the country's third-largest refiner, has signed a deal to sell a combined 1.2 trillion won ($1 billion) of diesel, naphtha and jet fuel this year to Saudi Aramco, its biggest shareholder. Under the deal for the whole of 2017, S-Oil will supply Saudi Aramco with 6-8 million barrels of light naphtha.
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