The Naphtha market has shown mixed trends globally in the week ending May 31, 2024. Despite a general decline in oil prices, Naphtha prices have varied across different regions. Demand patterns have also differed, with only slight adjustments in supply projections by major energy agencies.

In China, Naphtha prices rose by 2%, from USD 970/MT to USD 990/MT, signalling a recovery after a period of decline. This change coincided with an oil spill caused by a tanker accident involving the Suezmax, a Symphony near Qingdao port, a major oil hub in Shandong province. The accident has led to restrictions on vessel movement around the affected area. The volatility in the international crude oil market has led to cautious trading behaviour among domestic Naphtha traders in China. Factors such as bearish US inventory data and reduced geopolitical risks have also played a role in shaping market dynamics. In Japan, Naphtha prices have seen a nearly 1% increase, continuing an upward trend. This increase is partly due to the depreciation of the South Korean currency, which has resulted in higher commodity prices. The strong US dollar, combined with weaker local currencies, has created difficulties for refiners in these regions who rely heavily on imported feedstocks for their refineries. Additionally, there has been a notable rise in the demand for ocean freight in Asia, which may be attributed to the start of a restocking cycle. This is possibly due to the commencement of a restocking cycle in Europe and North American importers accelerating their peak season demand. These importers are concerned about potential disruptions later in the year due to labour issues or disturbances in the Red Sea region.

In the European market, Naphtha prices have remained stable on the lower end with slow market offtakes. Specifically, in the Dutch market, Naphtha prices have remained stabilized at USD 608 per metric ton (MT). This stability occurred despite the recent OPEC+ meeting, where both the Organization of Petroleum Exporting Countries (OPEC) and Russia decided to extend their voluntary production cut of 2.2 million barrels per day for an additional three months. However, this extension did not sufficiently motivate investors to raise crude oil prices. Consequently, falling crude oil prices, a significant factor in Naphtha production costs, contributed to the decrease in Naphtha prices. The derivative markets, including key products like Ethylene, Toluene, and Propylene, have also experienced a stable to declining trend due to reduced demand. Overall, the low demand for Naphtha and its derivatives has contributed to the observed stable to declining price trend in the Dutch market. These factors highlight the intricate dynamics that impact Naphtha prices, where supply-side decisions and demand-side realities intersect.

ChemAnalyst predicts that Naphtha prices will likely rise due to OPEC+ production cut extensions. However, the volatile international crude oil market may limit support for the domestic Naphtha market. Refineries are actively adjusting prices and trading based on demand, especially during the restructuring phase. As for gasoline, short-term refinery operating rates may remain stable, and residents' normal travel patterns will continue to influence oil usage. Overall, the gasoline supply and demand situation are expected to remain relatively unchanged, with market volatility prevailing.