The naphthalene market showed a slightly bullish trend in the latter half of March 2025. After witnessing stabilization in February and early March, naphthalene prices rebounded in the market. This shift in the market sentiments was driven by rising feedstock crude oil prices and increased refining activities. The rise in refining activities for fuel production led to the declined availability of feedstock for naphthalene production. While supply tightened due to the declined availability of crude oil, the demand from the downstream phthalic anhydride market remained sluggish, which prevented a major rise in the prices.

The feedstock crude oil inventories took a hit last week and dropped by 3.3 million barrels to 433.6 million barrels in the last week. The supply dynamics of naphthalene were impacted by the declined availability of crude oil in the market. The decline in the stockpiles was primarily driven by ramped-up refining activities, which led to higher crude oil processing and ultimately reduced the availability of crude oil for downstream naphthalene production. Additionally, the demand for gasoline and diesel, increased as suggested by declined inventories, which supported the bullish momentum for refined petroleum products. Due to the tightening of supply and declined output, the naphthalene market witnessed upward pressure in H2 March 2025.

On the demand front, the consumption of naphthalene in the production of phthalic anhydride appeared to be sluggish as the downstream applications, such as plastics, resins, and coating, showed subdued consumption patterns in the market. With declining downstream demand, the procurement of naphthalene was average, putting downward pressure on the demand fundamentals. Overall, the demand for naphthalene appeared to be subdued in the week, but the bullish sentiments were supported by rising production costs and reduced availability of the feedstock in the market.

According to the ChemAnalyst database, the price movement is expected to remain bullish in the coming weeks owing to supply-side pressures. The availability of feedstock crude oil is expected to decline further due to sanctions, as U.S. sanctions targeted China's imports from Iran days earlier, which could lead to increased import demand for US crude oil. While the demand fundamentals remain weak from the plasticizer and phthalic anhydride sector, any upward pressure from the demand side will lead to notable price rises. If the demand continues to be weak, the production may decline further, which may offset the upward pressure from the supply side, leading to downward pressure on the naphthalene market.