Asia naphtha prices touch three-month high on crude oil rally

SINGAPORE (ICIS)–Asia naphtha prices rose to a three-month high, bolstered by strong gains in crude oil futures, with healthy demand and curtailed excess flows from Europe poised to lend market support.

In afternoon Asian trade, open-specification naphtha prices for second-half July delivery averaged at $380.00/tonne CFR (cost and freight) Japan, climbing by $18.50/tonne from the previous session on 5 June.

Spot naphtha prices were last seen at such levels on 6 March 2020 at above the $400/tonne CFR Japan mark, ICIS data shows.

ICE Brent August crude oil futures rallied to $42.53/bbl at noon in Asia, after OPEC+ agreed to deepen record output cuts until the end of July.

Asia naphtha markets are drawing support from healthy demand for petrochemical production, helping to soak up regional supply.

Asia petrochemical shares were also higher at the week’s outset, tracking the gains in crude oil markets.

End-users in South Korea have scooped up spot naphtha cargoes for July delivery.

An anticipated contraction in Western arbitrage cargo flows to Asia in July amid hopes of recovering gasoline-blending demand lifted market sentiment, as country lockdown measures ease.

An estimated less than 2m tonnes of deep-sea naphtha from Europe is expected to reach Asia next month, down from high volumes of at least 2.5m tonnes in May and June.

In downstream sectors, margins for olefins in Asia have also gathered ground amid overall steady demand, according to ICIS data.

Naphtha spot prices fell below $170/tonne CFR Japan in April, when the product’s crack spread – a measure of its refining margin – slumped into double-digit negative territory.

Naphtha’s crack spread closed at $56.78/tonne on 5 June, the highest in more than a month.

Focus article by Melanie Wee