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Asia gets more European naphtha but Saudi factor supports prices

By Seng Li Peng

By Seng Li Peng

SINGAPORE (Reuters) - Naphtha arrivals in Asia this month from the West including Europe and the Mediterranean are seen recovering from a three-month low in September to a two-month high of about 1.3 million tonnes, industry sources said on Tuesday.

But this lags the monthly average of 1.5 million tonnes for the first nine months of this year, data from Reuters and Refinitiv Oil Research showed.

Spot prices, which had risen in late September to levels not seen since the first half of 2018, would stay supported as a result.

The Sept. 14 attacks on Saudi Arabian oil facilities had flipped the market around as state oil company Aramco went on a buying spree to plug its gaps.

"The prompt-month supply length is gone after the attacks," an industry source based in North Asia said.

Based on data from IHS Markit, Saudi's naphtha production is estimated to be 100,000 to 150,000 tonnes lower in September/October following the attacks.

"Gasoline production lost is about 100,000 to 150,000 barrels per day," said Matthew Chew, principal oil analyst at IHS Markit.

Since the attacks, Aramco had swept up 130,000 tonnes of naphtha from India, and drove premiums for Chennai cargoes to a 6-1/2-year high.

It also bought at least 120,000 tonnes of European naphtha for Nov. 1-3 arrival in Asia.

"Our view is that the Asian naphtha market will continue to recover towards the end of this year," said Chew, adding that naphtha demand was also seasonally stronger during the year-end.

Apart from supply disruptions, most crackers have completed their maintenance with the exception of a handful such as South Korea's Lotte Chemical and Taiwan's CPC.

Changes to be made in the shipping industry starting in 2020 in which marine fuel sulphur content will be capped at 0.5% would likely lead to stronger demand for naphtha as it is also a blendstock for gasoline, Chew said.

Secondary units such as residue fluid catalytic crackers (RFCCs) use fuel oil as a feedstock to make gasoline but refiners could divert the former into bunker fuel instead.

Eyes are now on cargoes for November/December arrival, especially when freight rates are high due to sanctions on tanker subsidiaries of China's COSCO by Washington at a time of strong fundamentals.


(Reporting by Seng Li Peng; Editing by Dale Hudson)