Asia Naphtha/Gasoline-Naphtha inter-month spread narrows to multi-month low, crack cools

NEW DELHI: Asia's naphtha crack eased on Tuesday, and the inter-month spread between first-half October and November narrowed in backwardation to its lowest since December 2020.

The crack was at $120.55 per tonne, down from 124.90 a tonne in the last session, while the inter-month spread slimmed to $3 per tonne.

Market participants said that increasing US light naphtha arbitrage, and declining ethylene prices may have pressured Asian cracks. For tenders, Indian Oil Corp (IOC) sold 35,000 tonne of naphtha loading Sept. 9 to 11 from Chennai to BP at a lower premium of $12 a tonne above its price formula, traders said. IOC had sold naphtha to SOCAR at a premium of $28.20 in July.

Asia's gasoline crack also softened for a second consecutive day to $8.29 a barrel from $8.95 on Monday, as weak demand in the region weighed on margins.

Refinery output in China, the world's leading oil importer, fell to its lowest in July since May 2020 as independent plants slashed production amid tighter quotas, high inventories and weakening profits. Denting consumption outlook further, Japan was set to extend its state of emergency in Tokyo and other regions to Sept. 12 and widen coronavirus curbs to seven more prefectures.

• Oil prices fell on Tuesday, with both WTI and Brent contracts heading for a fourth straight session of losses, weighed down by a weak demand outlook in Asia, and as OPEC and its allies said the market did not need more crude.