Asian light distillate prices rose on Thursday, tracking gains on crude, and naphtha's notional premium rose on expectations of lower exports from India for next month. The benchmark open-spec naphtha contract for first-half February rose $9.00 to $874 a tonne, cost-and-freight Japan basis.
The backwardation between the first halves of February and March, which indicates notional premium, rose to $3.50 a tonne from the previous session's $1.50, while the ICE/Brent naphtha crack for first-half February held at $169 a tonne.
Indian naphtha exports were pegged at around 800,000 tonnes for next month, but traders remained uncertain if the country could meet this target as it continued to absorb naphtha for domestic use due to high natural gas prices. Indian refiners had sold more than 1 million tonnes in September and October when domestic naphtha demand was soft.
But the price gains were limited by the outage of Mitsubishi Chemical's naphtha cracker, as the company shut one of two units at its Kashima plant near Tokyo last week, following a fire. The cracker, which is capable of producing about 516,000 tonnes of ethylene per year, is expected to remain shut for about three to four months.
The unit accounts for almost 12 percent of Japan's output capacity for ethylene, and traders said the company would probably delay or resell cargoes of naphtha onto the spot market, which should weigh on prices. The reforming margin fell by $1.22 to $5.88 a barrel amid soft demand from major regional buyers such as Vietnam and the strong naphtha market.
But the losses were limited by Morgan Stanley's purchase in the Singapore cash market, as the US investment bank bought a 50,000-barrel lot of the 92-octane grade from Arcadia at $101.20 a barrel, higher than Wednesday's offer level of $99.40.