SINGAPORE (ICIS)--Asia naphtha prices softened alongside global crude oil futures, but pockets of spot demand and high freight rates owing to squeezed vessel space availability for the clean product aided in cushioning sentiment.
At the midday session in Asia, open-specification naphtha prices for second-half June delivery averaged at $202.00/tonne CFR (cost and freight) Japan, down by $15.75/tonne from the previous close on 30 April, with current levels at a one-month low.
Naphtha prices are well below year-ago levels at $570/tonne CFR Japan, ICIS data shows.
The Asia market was closed on 1 May 2020 due to regional public holidays in Singapore, South Korea, China and Taiwan.
ICE Brent July crude oil futures stood at $25.68/bbl at noon session on Monday, having settled lower after US President Donald Trump floated the possibility of raising tariffs in China amid the coronavirus pandemic.
Asia naphtha markets drew comfort from recent spot June purchases in parts of northeast Asia.
Key importer Taiwan’s Formosa Petrochemical (FPCC) purchased 100,000 tonnes of open-specification naphtha at around parity to its pricing formula for first-half June delivery to Mailiao.
FPCC had prior to this withdrawn its tender, which originally called for second-half May spot naphtha supplies because of sufficient inventories.
South Korea’s Hanwha Total Petrochemical raked in up to six cargoes of heavy full-range naphtha cargoes for delivery in the same period.
Market sentiment was in part buoyed by constraints in tanker space availability for moving clean products, with large vessels being maxed out for floating oil storage amid brimming supply.
As of 4 May, freight rates for shipping light distillates on long-range 1 tankers from the Middle East to Japan averaged at around $129/tonne, significantly higher than the $59.17/tonne freight via the same route, according to market sources.
Elevated freight costs has consequently made arbitrage economics to move surplus cargoes from the West to Asia less viable, on paper at least.
That said, naphtha demand for gasoline-blending in Europe remains slow amid lockdowns caused by the coronavirus pandemic.
The intermonth time spread between the second-half of June and the second-half of July was at a $5.00/tonne backwardation, narrower than the previous $7.00/tonne backwardation on 30 April, according to ICIS data.
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May 04, 2020 at 04:25PM
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Asia naphtha markets soft; high clean product freight costs cushion sentiment - ICIS
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