Asia's naphtha extended price losses to reach a five-session low on Thursday, while cracks rebounded from a two-week low as lower Brent crude boosted the naphtha margins. Trades were muted as year-end holidays drew traders away. The naphtha arbitrage window was technically shut on Thursday as demand tapered off. It was mostly open in the last four weeks and some 800,000 tonnes of Western naphtha was booked for January-February arrival in Asia, traders said.
"But demand for open-spec naphtha is now cooling off after a run-up in buying interest due to low inventories and shipment delays caused by bad weather (in South Korea)," said a North Asian trader. "Heavy full-range grade is still short in the Far East."
Whether or not traders will bring in fresh cargoes from the West remains to be seen. "Typically, demand will strengthen after the festive seasons, but with the current economic climate, it is hard to determine which direction demand would take," said a Singapore-based trader. As of now, Japanese and Taiwanese crackers have not restored runs to maximum mode because China has limited its plastics imports.
"Maybe the Chinese may start to re-stock after the Chinese Lunar New Year and there could be a chance of crackers ramping up in March," said another North Asian trader. "But for now, demand for ethylene is weak and supplies are still high despite the run cuts. Based on these, Japanese and Taiwanese crackers are unable to run at full-tilt next month."
Gasoline cracks recovered from a two-session low to reach a two-session high, with Singapore onshore light distillate stocks hitting their lowest in six weeks. The stocks, which comprise mainly of gasoline, fell nearly 8 percent or 849,000 barrels to reach 10.146 million barrels in the week ended December 28, official data showed.
China, South Korea and Taiwan hardly shipped any of their gasoline to Singapore during that period. Taiwan's Formosa will restart one of its two 84,000-bpd residue fluid catalytic crackers (RFCC) in second half of January following a maintenance shutdown which started around December 13. It will shut the other RFCC in April for maintenance to coincide with a turnaround at one of three crude distillation units, each with a capacity of 180,000 bpd.