Asia Naphtha/Gasoline-Naphtha Cracks Show Resilience Amid Limited Trade

Activity in Asia's naphtha spot market experienced a slight downturn, with some buyers opting to stay on the sidelines after fulfilling a portion of their demand through March. Despite this, the absence of lower-priced sellers provided support to prompt prices, leading to a widening of the market's backwardation.

Towards the end of the previous week, at least two South Korean refiners finalized their naphtha requirements for the first half of March. The uncertain run rates projected for March in the region, coupled with an increase in arrivals during February and March, exerted downward pressure on the market. However, late afternoon concerns about potential conflicts in the Red Sea causing delays in cargoes arriving from the Middle East helped bolster cracks, pushing them above $100 per metric ton on Monday.

There are apprehensions regarding prompt short-covering demand emerging for February if certain Western cargoes from Europe face delays in reaching Singapore. However, buyers are exercising caution and hesitancy at present.

Concurrently, discussions pertaining to arrivals in Southeast Asia have held steady at premiums ranging from $20 to $30 per metric ton for February. Sellers in the region have indicated that discussions for Northeast Asia align closely with these figures.

On the export front from the Middle East, offers have been presented at premiums ranging from $40 to $50 to free on board (FOB) Middle East prices for shipments earmarked for February.

While gasoline cracks have shown minimal changes, February activity has seen a slight uptick as certain refiners have initiated sales discussions, aligning with earlier expectations. Formosa Petrochemical in Taiwan has taken the lead by commencing its February offers, encompassing at least two lots of motor fuel along with some high octane blendstocks.

Market sentiments regarding the outlook for February and March have been mixed, with some regions experiencing tepid demand during the winter seasonal lull. This is evident from the presence of ready sellers in the open trading market since the previous week, indicating a cautious approach in response to prevailing market conditions.

The Asian naphtha spot market reflects a delicate balance influenced by various factors. The cautious stance of buyers, concerns about prompt short-covering demands, and the impact of geopolitical uncertainties on arrivals from the Middle East contribute to the intricate dynamics of the market. The stability in discussions for arrivals, coupled with the proactive approach of certain refiners in initiating sales discussions for February, paints a nuanced picture of the ongoing trends and considerations within the regional petrochemical landscape.