Asia's naphtha price fell from a near six-month high on Tuesday to a two-session low but physical timespreads stayed near a nine-month high as supply tightness persisted. Kuwait Petroleum Corp (KPC) will start naphtha term talks next week with Asian buyers for supplies lifting April 2012 to March 2013. "This is a bad time for customers to enter into term talks as spot premiums for Indian cargoes have already hit the $32-a-tonne level," said a North Asian trader.
Supplies in the first quarter are traditionally tighter than in other quarters because alternative feedstock liquefied petroleum gas (LPG) is usually used to meet winter demand, prompting crackers to rely solely on naphtha. The situation has been exacerbated this year due to refinery shutdowns in Europe, traders added.
Swiss-based Petroplus, Europe's largest independent refiner by capacity, is filing for insolvency after battling with high debt and poor refining margins. Three of its five refineries, Petit Couronne in France, Cressier in Switzerland and Antwerp in Belgium, have been shut this month.
Its Coryton refinery in the UK is operating at an unspecified rate and the UK administrator PwC is still in talks to secure fresh crude oil supply for the plant, a union official said on Tuesday. KPC had previously sealed a contract for full-range naphtha lifting April 2011 to March 2012 at premiums of $18.50 a tonne to Middle East quotes on a free-on-board (FOB) basis.
"But with the current strong market, do you think teen levels are workable for KPC?" asked another trader. "More likely premiums will be in the $20s level." Gasoline cracks retreated to a two-session low after settling at their highest in nearly 3-1/2 months in the previous session. But current levels above $10.00 a barrel still indicted a strong market due to healthy consumption in the region despite winter season in parts of Asia.
Sales of gasoline in Japan, for instance, rose in for the first time in more than six months in December. Demand from Indonesia, Asia's top gasoline importer, is also expected to be healthy ahead of its Balongan refinery shutting for maintenance in March. However, its government is considering hiking subsidised fuel prices by as much as 44 percent this year to reduce the burden of subsidies on the state budget and spend funds on roads instead, said Indonesia's deputy energy minister.
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