For the Quarter Ending June 2021
During the second quarter of 2021, the overall Naphtha output by the US refineries improved as several crackers in the US Gulf region were seen ramping up run rates after the winter storm Uri affected production levels in Q1. As per the EIA report, net U.S. Naphtha production for petrochemical feedstock usage surged to 6.08 million barrels in April 2021. As the regional industrial infrastructure showed better efficiency backed by strong enquiries for petrochemical intermediates, the domestic Naphtha market reported improved dynamics in the North American region. Even though the prices of Brent Crude observed continuous hike in the North American market, Naphtha prices showed some ease during the second quarter of 2021. FOB Texas discussions were assessed at USD 882 per tonne in June.
Demand outlook in the Asia Pacific region remained uncertain during the second quarter of 2021 as resurgence of new virus variants restricted operations in the key economies like India. Temporary closure of Naphtha crackers in South Korea curtailed the regional availability by a significant amount. However, the pricing trend continued to remain well supported by strong gains in the international crude oil. Several downstream players procuring Butadiene and Ethylene reported increasing feedstock spreads with Naphtha. While the commissioning of new crackers kept the supplies ample in the Asian Market, the fall in olefins margins caused several reductions in the operating rates. Indian Naphtha pricing discussion settled at USD 1035 per tonne FOB Kochi in June.
During the second quarter of 2021, European Naphtha supplies were uplifted with the influx of US shipments from the US Gulf coast. In June, around 375,000 tonnes of the US Naphtha imports were estimated to arrive in early June, the highest in the past four years. Surged Naphtha volumes in Europe opened the regional arbitrage with the Asia Pacific region. Demand from the gasoline blenders was reportedly less in June which further pushed the margins of European refiners. In hopes of better netbacks, some European refiners were heard directing some cargoes to east of Suez from the outlets in northwest Europe (NEW) and the Baltic.
For the Quarter Ending March 2021
For more than half of Q1, Naphtha supplies remained tight in the North American region, as various US-based crackers of INEOS, LANXESS, DOW Chemicals, Oxy Chem etc., were shut down amid the unprecedented freeze weather condition in the US Gulf coast and some parts of Louisiana. The demand however, hiked from the downstream petrochemical sectors. Surged demand and sluggish supply scenario inclined the prices of Naphtha, taking CFR-New York prices in March to around USD 960/ton. Towards the end of Q1, a steady increase could be observed in the crude throughput rates by Gulf coast which meant improved naphtha production.
Naphtha supplies in the region were balanced, due to the restart of new crackers in China. However, a major plant turnaround was noted in South Korea, which was further translated into widened supply-demand gap of Ethylene. Reduced overseas imports put forth supply related constraints in front of the suppliers. However, demand remained upbeat as several Chinese buyers were heard filling their inventories before the Chinese Lunar New Year. The tight southeast Asian market could sense some ease with Thai PTTGC starting its 500 KTPA Naphtha Cracker in early January. Due to production cuts in crude oil by OPEC nations, Naphtha prices took an uptrend with quarterly average standing at USD 848/ton CFR India.
The supplies remained tight as the winter season hit the region and several plants in the northwest Europe reduced their production efficiencies. In January, nearly 5.2 million barrels of gasoline was exported to the US, with nearly 680,000 barrels booked in advance for February. Regional demand remained high due to the surge in demand for propane and butane for heating purposes as the winter season hit the northwest European region. Strong domestic and export demand hiked the prices of Naphtha by 70 USD/ton during the quarter while the quarterly average stood around USD 590/ton.
For the Quarter Ending September 2020
Supply remained tight in the third quarter of 2020 against the backdrop of lower deep-sea arbitrage from west followed by several refinery turnarounds in the US due to spate of seasonal Hurricanes. However, in the second half of the quarter, supply considerably eased as crude oil futures tumbled to astonishing lows amid narrowed fuel demand under consistent increment in coronavirus cases across the globe. Demand for light Naphtha utilized in manufacturing of olefins remained stable to firm while that of heavy Naphtha crippled on the back of volatility in the aromatics sector. Demand pattern was articulated when spot cargoes for light Naphtha achieved premium whereas heavy grade Naphtha received appreciable discounts. Naphtha’s crack spread in Asia traced a downward trajectory from USD 62.73 per tonne to USD 56.60 per tonne in the beginning of August.
Naphtha values firmed in the second half of the third quarter supported by tight supply from western countries on the backdrop of logistics disruption due to US hurricanes. In addition, cuts in the operating rates balanced the supply fundamentals and aided is maintaining the inventory levels. Prices of Naphtha in Europe averaged around USD 951 per tonne, with a rise of 1 per cent since July. Limited imports from the US provided room for European manufacturers to extend their profit intakes amidst widened demand and supply gap. However, supple inflows of cargoes from Russia and reduced arbitrage from Asia marginally pressurized the market fundamentals in late September.
In contrast to the market fundamentals of Naphtha across the globe, saturated US market has made light Naphtha dive to its lowest level in the first week of September from June. As the force measure caused by Hurricane Laura negatively affected the export margins of various oil refiners, market players eyed to make up for their loss by catering to the large export demand in late September. However, few players showed resistance towards voyages to Asia due to the volatile freight charges in the region.