SINGAPORE: An easing of the glut in Asia's naphtha market has driven up front-month prices to parity with contracts for the month after, as cargoes from the Middle East and India have recently shipped to Europe instead of the East.
Ongoing and upcoming maintenance in Asia and the Middle East, including a refinery in Ras Tanura which had a fire at its oil terminal this week, were also helping to lift sentiment.
In a weak market, the front-month price is lower than for the following month, resulting in a 'contango' market structure. Currently, the naphtha price for the first half of November is at the same level as the first half of December at $389.50 a tonne.
Stronger fundamentals also resulted in cargoes in the spot market being sold at a sharply higher price.
South Korea's YNCC, for instance, paid a discount of $4 to $4.50 a tonne to Japan quotes on a cost-and-freight (C&F) basis for two cargoes, averaging a total of 50.000 tonnes, for first-half November arrival at Yeosu.
Not only was the discount sharply narrower than the $11 YNCC paid on Sept. 1, but this was also the narrowest discount seen in South Korea since June 27.
Traders were not convinced the strength would last, however, as there are additional supplies coming up from the fourth quarter.
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