Asia's naphtha price and intermonth spreads were at their highest in about two weeks on Thursday. Cracks rose to an 8-1/2 month high as tighter supplies in Europe were expected to impact the East, which is structurally short of the light fuel, traders said.
Asia was increasingly feeling the impact of tighter supplies in the West as refineries have either shut or are planning on shutting down permanently or temporarily due to poor margins. Some of these include Swiss-based oil refiner Petroplus, US Hovensa, Alon USA Energy
Tighter supplies in the West would choke off fresh opportunities for traders to move cargoes into Asia. "There are lots of refinery shutdown news in Europe and the US, and this is driving the market in Asia. The tight gasoline supplies in the West are also affecting naphtha," said a North Asian trader.
Naphtha can be reformed into gasoline or be used as a gasoline blendstock, and in a strong gasoline market, more naphtha will be channelled into the petrol pool. South Korea's Honam Petrochemical bought two medium-range cargos for first-half March arrival at premiums of around $7.00 a tonne to Japan quotes on a cost-and-freight (C&F) basis.
Gasoline cracks were at their highest in slightly more than three months on tight prompt supplies in pockets of Asia and the West. India's Essar Oil sold 55,000 tonnes of gasoline for second-half February loading from Vandina to an undisclosed buyer at a discount of $1.00 a barrel to Singapore quotes on a free-on-board (FOB) basis.
Traders said the current price was likely higher compared to a previous sale where the discounts were heard at steeper levels. In the US, gasoline inventories fell 390,000 barrels against expectations for a 1.9 million barrel rise. The fall in inventories reflected that supplies were shrinking faster than demand, which was weak.
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