Asia's naphtha crack for front-month first-half May jumped 10.72 percent almost to a two-month high of $85.20 a tonne on Wednesday due to steady demand which is reducing the impact of a supply glut, traders said. A smaller number of western cargoes arriving in Asia next month will help to reduce the oversupply, which had persisted for months.
But some traders were unsure if the strength could last because the market is very sensitive to the number of European cargoes arriving in Asia. "The naphtha market is very choppy and I am not sure if the strength can last ... the current strength is due to lower European and Indian cargoes for April shipment versus March," said one trader.
South Korea's YNCC has bought 50,000 to 75,000 tonnes of naphtha for first-half May arrival at Yeosu at $1 to $2 a tonne below Japan quotes on a cost-and-freight (C&F) basis, making this the narrowest discount seen in the country in a month. Two days ago, the discount level was at $4 a tonne in South Korea following purchases by LG Chem. Buyers were also looking to replace some naphtha with alternative feedstock liquefied petroleum gas (LPG). But not all traders were convinced this would work given the growing demand in North Asia and India for LPG, also used for heating, transportation and cooking.
India's Reliance Industries has sold 75,000 tonnes of naphtha for April 18-24 loading from Sikka to Petro-Diamond at a premium of about $10 a tonne to Middle East quotes on a free-on-board (FOB) basis. It had previously sold at least two 55,000-tonne cargoes for March loading from the same port at premiums ranging from $5 to $8 a tonne.
GASOLINE GAINS Asia's gasoline crack, similar to naphtha, was near a two-month high of $11.56 a barrel as supplies tightened on refinery maintenance and buoyant demand within and beyond Asia. Four more gasoline trades were done in the Singapore cash window, bringing the total volumes transacted for April shipment to about 1.4 million barrels.