ME naphtha spot exports hit one-year high
Dubai, October 2, 2010
Middle East producers sold around 650,000 tonnes of naphtha for October loading, the highest volumes in at least a year and weighing down sentiment, traders said. But exports for November are expected to be lower, they said.
The high spot volumes from the Gulf for October are coming as India is also expected to keep exports at high levels of 850,000 tonnes this month, while regional demand could not soak up all the barrels.
The intermonth spread has stayed in negative zone for three weeks from Sept 7 to 28, signalling weak prompt demand. It briefly turned positive on Wednesday when Formosa returned to the market after a month's absence but tipped back into the red a day later.
'Formosa bought only 150,000 tonnes for first-half November, while demand in South Korea is largely stable,' said a trader. 'Based on Thursday's spot deal in South Korea, you can see that the market is still long on supplies.'
Competitor CPC has been struggling with high naphtha stockpiles since July.
The bulk of the October spot volumes came from Saudi Aramco and Kuwait Petroleum Corporation (KPC), which together sold a total of around 600,000 tonnes.
These volumes include 50,000 tonnes for end-October loading from Ras Tanura, which Saudi Aramco sold to Chevron at premiums of $8.00-$9.00 a tonne to Middle East quotes, on a free-on-board (FOB) basis, late on Thursday.
Qatar sold 55,000 tonnes of naphtha for mid-October loading to China's Fujia Dahua, shipping reports showed. Adnoc, which sold more than 200,000 tonnes of spot naphtha for August loading, was not seen selling October spot barrels, traders said.
'If they did, it would have been very quiet as it was off the radar,' said a trader.
It was unusual for the four Gulf producers to sell hefty spot volumes, as most of their barrels in the past were tied up in term contracts. But high term premiums have forced many buyers to either drop the long-term contracts, or reduce their volumes.
These prompted the suppliers to unleash large volumes of naphtha into the spot market since July.
Bahrain's Bapco and Samref, a joint-venture between Saudi Aramco and ExxonMobil, are regular spot sellers, and their October sales are excluded from the estimates.
However, Gulf spot volumes are expected to slide for November loading, particularly from Saudi Arabia, as more liquefied natural gas will be diverted for use in heating during the winter months.
'Saudi's A180 is from gas condensation. Adnoc's parrafinnic naphtha and Qatar's naphtha are using the same process,' said a Singapore-based trader.
On top of this, Kuwait is shutting an 80,000 barrel-per-day (bpd) crude distillation unit at its 270,000-bpd)Mina Abdulla refinery in November for planned maintenance.
'That would also affect some, although not a lot of Kuwait's supplies,' said a second Singapore-based trader.
No definite range for November was immediately available, but traders said it November Gulf spot barrels will fall below 550,000 tonnes.-Reuters