Some 300,000T ME, Suez naphtha to move West
Singapore, July 22, 2010
About 300,000 tonnes of Middle Eastern and Suez naphtha cargoes have either been fixed, or provisionally booked for a rare move to the West to help ease the high stockpiles in Asia, traders said on Thursday.
This move, mainly to Northwest Europe and the United States, has helped to improve the poor market sentiment due to weak demand and drove up naphtha cracks to their highest in more than two weeks.
Asia, which is structurally short in supplies, has traditionally looked to Europe, the Mediterranean and the United States to plug its supply shortage.
A trader said that the last time a significant volume was moved from the Middle East to the West was in late 2008 when the financial crisis hit.
'The cargoes have to go somewhere because Asia has no appetite for them,' said a Singapore-based trader, adding that although prices in the West were also weak, they were at least more lucrative than values in Asia.
Egyptian cargoes lifting from Suez are also usually targeted at Asian customers, but Asia is struggling under high inventories.
'What I understand is that these parcels were mainly booked to move in end July to early August,' said a North Asian trader.
'That could have been a reason why India's discount levels stabilised,' said a North Asian trader.
The Asian market was spiralling down at the start of the month after Middle Eastern suppliers - Saudi Aramco, Kuwait Petroleum Corp (KPC), Abu Dhabi National Oil Co (Adnoc), Adgas, and Qatar's Tasweeq - released abundant spot cargoes after they failed to get term buyers to renew their contracts.
So far, some 1 million tonnes have been offered or sold for July-August loading from the Middle East.
Cracks were continuously being weighed down, hovering at below $60.00 a tonne premium between July 12 and 20.
'But cracks surged more than $10 today, and this could be due to parcels moving West. You cannot see any other reason apart from that for now,' said a second Singapore-based trader.
South Korea's Honam on Thursday paid a discount of $10.00 a tonne to Japan spot quotes on a cost-and-freight (C&F) basis for 25,000 tonnes arriving in second-half August at Daesan. The discount was narrower than what YNCC paid on July 19 for 50,000 tonnes for the same arrival period at minus $13.50 a tonne, C&F.
Cracks, the premiums or losses obtained from refining Brent crude into naphtha, surged $12.71 to $74.03 a tonne, highest since July 7.
'But I don't think more cargoes will go West in the short-term, because if they move too much, supplies will tighten in Asia,' the North Asian trader added.-Reuters