Asia's naphtha crack rose for the sixth straight session on Thursday to reach a 6-1/2 month high of $76.73 a tonne, while gasoline hit a five-month high of $10.28 a barrel despite this being the off-peak demand season for petrol. For more than five months, the naphtha margin was mostly in the red as open-specification naphtha price lagged Brent crude.
But the recent tight supplies caused by repeated low levels of European cargoes coming in, coupled with demand and refinery maintenance, have turned the margins into very small premiums since Wednesday, based on a Reuters calculation. South Korea's LG Chem was in the market on Thursday to buy naphtha but the results were not immediately clear. This week alone, Taiwan's Formosa, South Korea's Hanwha and Malaysia Titan had locked in first-half December cargoes while CPC has an outstanding tender to purchase naphtha for December.
In the Singapore cash window, trading house Petredec made its first naphtha deal by buying a first-half January cargo from BP at $452 a tonne. The European firm, which trades mainly liquefied petroleum gas (LPG), set up its Asian naphtha operations in Singapore this year. LPG is an alternative feedstock to naphtha. Some Asian crackers are able to replace 5 to 20 percent of naphtha with LPG, which has been in oversupply this year, forcing the fuel to be stored on vessels. At one point, there were as many as 14 Very Large Gas Carries (VLGCs) being used as storage.
Most of these VLGCs have found buyers recently, leaving no more than two vessels left behind for storages. The stronger fundamentals drove Indian spot prices up. Oil & Natural Gas Corp (ONGC) sold 34,500 tonnes of naphtha for November 7-8 loading from Hazira to Petro-Diamond at premiums of about $8.50 a tonne to Middle East quotes on a free-on-board (FOB) basis.
This sharply contrasted the discount of $3 to $4 ONGC had fetched from Vitol for a cargo scheduled for October 27-26 loading from the same port. Indian Oil Corp (IOC) on the other hand sole 35,000 tonnes of naphtha for November 15-17 loading from Chennai to Socar at premiums of above $9 a tonne to its own price formula on a FOB basis. Reliance had also sold a cargo, likely to BP, for November 20-25 loading from Sikka, traders added. Mangalore Refinery & Petrochemicals Ltd (MRPL), which is not a regular importer of reformates, was seeking the gasoline blendstock December 1-10 arrival at New Mangalore.