Asia's naphtha intermonth spread turned negative on Wednesday for the first time since December, in a sign that supplies are outpacing demand. Front-month first-half July price for benchmark open-specification naphtha was 50 cents lower than first-half August.
South Korea's Hanwha Total bought heavy full-range naphtha on Wednesday for first-half July at premiums in the high single digit a tonne level to Japan quotes on a cost-and-freight (C&F) basis or higher than the $5 to $6 a tonne premium it had paid on May 13, traders said. South Korea's GS Caltex had also bought similar grade in the high single digit premium a tonne.
But the two deals alone were not enough to turn the weak market around as the prolonged maintenance shutdown of Hanwha Total's cracker since end March had a more profound impact. Any unexpected or extended shutdown of crackers would hit demand as these units absorb open-specification and not heavy full-range naphtha as their main feedstock.
High volumes of naphtha being shipped to Asia from the West including Europe due to high refinery runs in most of first-half of 2019 added to the ample supply woes. European refineries had produced 3.6 percent more gasoline and 7.4 percent more naphtha in April compared with a year ago, data from Euroilstock showed on Tuesday.
Although Middle Eastern naphtha exports to Asia fell last week to 771,000 tonnes, these were still higher than volumes for the same week from a year ago at 740,000 tonnes, data from Refinitiv Oil Research showed. Asia's gasoline crack extended losses for the second day to reach a three-session low of $4.85 a barrel. Indonesian Pertamina, which is also Asia's top gasoline importer, had issued several tenders to buy term and spot gasoline.
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