NEW DELHI: Asia’s naphtha refining profit margin fell into discounts and market structure flipped to backwardation on Wednesday after disappointing trade data from China soured market sentiment.

The crack dropped to a discount of $2.45 a tonne over Brent crude oil, compared with a premium of $1.60 a tonne a day earlier. On Wednesday, the second-half July naphtha traded 75 cents higher than the following month.

Exports from the world’s second-largest economy fell 7.5% year-on-year in May, the biggest decline since January and swinging from 8.5% growth in April. Imports contracted 4.5%, a slower pace of decline than the 7.9% in the previous month.

China’s recovery is crucial for broader markets because it is the biggest petrochemical consumer in the world, market participants said.

Light distillate inventories at the Fujairah commercial hub rose by 587,000 barrels to a four-week high of 7.878 million barrels in the week to June 5, S&P Global Commodity Insights data showed.

Oil prices edged higher on Wednesday as Saudi Arabia’s surprise weekend pledge to deepen output cuts outweighed weak Chinese export data and rising US fuel stocks.

The European Commission is investigating the flow of allegedly fraudulent bio-fuels into the EU following a complaint from Germany, sources told Reuters, as a Commission spokesman said the bloc was determined to tighten oversight of the trade.