The Optimistic Demand Outlook for US Naphtha may Help Prices to Rebound in 2023

The demand for Naphtha from the US Atlantic coast was steady throughout 2022, and it increased in March when the sanctions started to affect Russian imports. However, this movement was impeded by the shortage of Jones Act ships to transport materials from the US Gulf to the east coast. It was also challenging to move segregated batches of Naphtha on the colonial pipeline since there was not enough fuel on the Atlantic coast to fill the lines. With selling interest from the manufacturer surpassing demand from the end-users at the end of the year, markets for all US Naphtha grades concluded 2022 on a gloomy note.

The Naphtha flow into gasoline blending was erratic due to swinging octane levels, especially in the year's second half. High octane prices often reduce blending demand for sub-octanes like Naphtha to balance out blend profits. The difficulties in exporting the commodity and the poor demand for gasoline blending contributed to declining costs of Naphtha in the US during the latter half of 2022.

American Naphtha fresh flows will probably concentrate on Heavy Virgin Naphtha (HVN) exports, maybe to Venezuela and Europe. Early in February of the next year, European restrictions on Russian oil products would go into effect, with the diesel and Naphtha sectors likely to be the most affected.

In order to offset shortages brought on by the Russian sanctions, increased refinery rates are anticipated in Europe. Additionally, heavy Naphtha will be in demand as a reformer feedstock. Exports from China are forced to go to Asia due to the sanctions, which could lead to an arbitrage draw for Naphtha from the US Gulf coast to Europe.

According to ChemAnalyst, in 2023, the fundamentals of the US Naphtha market are expected to change, which could open up new markets for the oversupplied Gulf coast. Covid-19-related shutdowns have reduced feedstocks demand from the Asia Pacific, particularly with China's zero-Covid policy. Margin and demand in the petrochemical industry have been negatively impacted by the fall in consumption brought on by widespread shutdowns in Asia, and only a modest rebound is anticipated during 2023, which will stabilize the cost or even lead to a price rise of Naphtha in 2023.