Asian naphtha prices fell on Tuesday, and the inter-month spread widened on ample supplies amid weak demand, depressing naphtha values. The spread between the first halves of September and October widened to $2.50 in contango from $2.00 in the previous session.
Soft demand by Asian petrochemical producers flipped the inter-month spread into contango for the first time this month on Monday. The key open-spec naphtha contract for first-half September fell to $675 a tonne, on a cost-and-freight (C&F) basis, from the previous session's $678.
The ICE Brent/naphtha crack edged down to $108 a tonne for the first-half of September, from $109 in the previous session and around $120-level last week, reflecting the increasingly bearish market.
Indian refiners are expected to export about 900,000 tonnes of August-loading naphtha after they had sold record-high volumes of 1 million tonnes for June, and more than 950,000 tonnes for July.
Top state-run refiner Indian Oil Corp has said it will export 2.4 million tonnes of naphtha for the year ending in March 2008, up from 1.6 million tonnes a year ago.
Despite the East-West spread widening to around $30 a tonne at the end of last week, about $2 higher than the notional freight cost, traders said tanker shortages and Asia's weak demand were discouraging arbitrage opportunities to the region. Lack of Western cargoes were helping to limit further losses in the Asian market. "Even if there were arbitrage cargoes, they would only be to fulfil contracted volumes," said a Seoul-based buyer. ICE September Brent crude was down 14 cents at $75.60 a barrel by 0400 GMT, down by about 30 cents from Monday's Asian trade.