The Asian gasoline crack hit an eight-month low of $4.44 a barrel on Monday, while the naphtha differential between second-half September and second-half October fell to a 5-1/2 month low of $6 a tonne as mounting supplies dragged the market down. The end of gasoline peak demand in the West and in Asia combined with key gasoline units in Asia having returned to production in July to result in heavier stock piles.
Europe cutting back on gasoline production leads to higher excess of naphtha as it can be used as a motor fuel blend stock or be reformed into gasoline. Talk of high volumes of European and US naphtha hitting Asian shores in August swiftly prompted spot premiums to sink further. "Naphtha stocks will be too high by end of August," said a Singapore-based trader, adding that things will get "ugly" for sellers.
South Korea's LG Chem has bought naphtha for first-half September delivery at under $5 a tonne to Japan quotes on a cost-and-freight (C&F) basis, the lowest spot premium seen in the country in at least 5-1/2 months. Since the week of July 28, spot premiums into South Korea have been falling due to the high volumes of European and US cargoes expected to arrive in Asia this month.
Premiums for first-half September cargoes dropped to $9 on July 30, then to $5 on July 31 from $15 to $16 a tonne in mid-July, Reuters data showed. Traders said there was also talk that KPIC, owner of the smallest cracker in South Korea, had bought a first-half September cargo on August 1 at a premium of $3.50 a tonne but this could not be directly confirmed. YNCC was in talks to buy naphtha for a 12-month period starting October this year.
India's ONGC sold 35,000 tonnes of naphtha for August 23-24 loading from Hazira to Unipec at close to $23 a tonne above Middle East quotes on a free-on-board (FOB) basis, traders said. This was about 26 percent lower than two cargoes ONGC had sold recently, Reuters data showed.