The Asian naphtha complex failed to receive much support Wednesday amid the excess surplus in the region, and subdued demand in the North. Apart from the tepid demand on paraffinic naphtha front, the requirement for heavy full range naphtha slowed substantially, contributing to the pullback on any support to the fundamentals, a market source said.
Competitive prices of regional condensates and light crude oil had drawn away splitter users’ earlier attraction to heavy full range naphtha. Such weakness was reflected in the paper market, as the September/October Mean Of Platts Japan naphtha swap time spread fell 25 cents/mt to plus $2/mt Monday.
The front-month time spread touched the same low on February 9. At 0300 GMT Wednesday, the spread was pegged at the same level at plus $2/mt. Looking West, arbitrage opportunities to send barrels to the East appeared grim as Asian naphtha cash differentials had weakened.
While the September-arrival naphtha arbitrage volume could not be discerned. Market sources said the combined volume in August and September would determine whether the Asian naphtha complex could reverse the oversupply situation.
“East [is trying] to shut the arb gate. Until East could digest the supply overhang, [bearish] sentiments will still prevail,” a naphtha trader said.
Separately, state-owned Indian Oil Corp. is offering 35,000 mt of naphtha, ex-Chennai, for loading over September 17-19, market sources said. The tender was heard to be expiring August 23, with next-day validity.
Privately-owned Reliance Industries was heard to have sold a 55,000 mt minimum 70% paraffin naphtha clip, to a Japanese buyer, for September 12-13 loading from Sikka, one market source said. The company declined to comment on details of the trade.
Meanwhile, Indonesia imported 171,877 mt of naphtha in June, down 29.75% month on month but up 1.71% year on year, detailed figures from Statistics Indonesia showed last week. For June, Indonesia has also turned its focus back to lower octane gasoline imports– primarily 88 RON grade — from the higher priced 92 RON and 95 RON gasoline grades.
Indonesia has capped monthly 88 RON gasoline imports at below 500,000 mt over last December to April this year but boosted imports in May to 596,878 mt. Indonesia imported 583,096 mt of low octane gasoline in June, while imports of gasoline with an octane number between 90 RON and 97 RON fell sharply from 688,735 mt in May to 581,160 mt.
“Due to the higher crude and gasoline prices, they are more focused on the 88 RON grade,” a market source with knowledge of Pertamina’s recent fuel purchase said.