For Quarter Ending March 2022
The American Market for Naphtha in the first quarter of 2022 had a sharp rise in prices owing to surged prices of upstream crude oil which was a consequence of increased geo-political risk situation (Russia-Ukraine war) and uncertainties revolving around the sanctions against Russia by the US and EU. At the end of the first quarter of 2022, the price of naphtha in US was recorded at USD 1007/MT Naphtha FOB Texas (USA). On March 8th the United States decided to stop various imports from Russia leading to higher prices for naphtha and upstream crude oil. Many American companies running in Russia stopped their production in Russia putting additional upward pressure on the prices of Naphtha and upstream crude oil in the United States during Q1 2022.
The Prices of Naphtha were down in the Indian Market in the first quarter due to very low demand from the crackers as a feedstock since LPG was available in discounted price from Russia on the account of the Russian-Ukraine conflict. In the Chinese market, the price was on an upward trend for the whole Q1 of 2022 due the recent surge in covid cases in China which halted production operations. The South Korean market also had a hike in naphtha prices due to high demand from downstream medical sector and limited imports from China. The price of naphtha at the end of Q1 2022 were recorded at USD 1363/MT for Naphtha FOB China, respectively.
The European petrochemical industry was hammered due to the energy crisis in the first quarter of 2022 on account of ban on Russian oil by several European countries. Europe being the largest plastic consuming community the demand for downstream for products like downstream polyethylene (PE) and polypropylene (PP) is high in Europe. The energy crisis also led to various suspension of few petrochemical refineries and the import of the upstream crude oil has been disrupted owing to the sanctions. All the above-mentioned factors have contributed to increased Naphtha prices in Europe during the first quarter of 2022. USD 1001/MT Naphtha CIF Hamburg (Germany) was the price of Naphtha in the German market during the end of the first quarter of 2022.
For the Quarter Ending December 2021
US naphtha prices saw an increase of 11.7% from the Q3 prices helped by higher natural gas prices which narrowed the premium over LPG during Q4 of FY21. The trans-Atlantic propane arbitrage margins were tight owing to higher propane prices in Europe as LPG stocks were diverted towards fuel use rather than as reformer feedstock. Spot export prices assessed on an FOB US Gulf basis stood at 724 USD/MT for Q4. Demand for Naphtha is expected to increase going into Q1 of FY22 as the increasing trend in Natural gas prices will create higher demand for naphtha as cracker feed. Feedstock crude prices as expected could be remarkably high throughout Q1 which may exert further upward pressure on the prices of Naphtha in the new year. A lot of Naphtha’s performance, however, depends on the performance of LPG, as higher demand for LPG could compel refiners to opt for Naphtha if its premium over LPG narrows down during Q1 of FY22.
Naphtha prices in China posted an increase of 8% in Q4 from the Q3 prices as demand from the downstream propylene industry remained strong throughout. Lower arbitrage margins for imports of propane from the US and the middle east also helped support naphtha prices during the quarter ending December. India’s domestic prices had seen a 14% decrease from the previous quarter assessed on an Ex-Works Panipat basis as LPG arbitrage margins from the Middle East softened during the same period. The average Ex-Refinery prices of naphtha in India for Q4 (calendar year) were assessed at INR 66285/MT at Panipat and INR 69335/MT at Kochi.
The outlook for Naphtha in Q1 of FY22 remains positive as Naphtha is likely to continue as the preferred cracker feed over ethane and propane for the new year. Naphtha futures for February and March had fared higher expecting higher crude prices in the first quarter.
European naphtha market in Q4 ended on a strong note as higher margins from crude combined with stronger demand from gasoline blending and lesser imports had helped close FY21 on a high. The premium of Domestically sourced naphtha assessed on an FD Hamburg basis over imports of naphtha assessed on a CIF ARA basis had narrowed to a quarterly low by mid-December helping refineries squeeze margins of around 5 USD per barrel of crude. Propane stocks were diverted as an energy source for refineries rather than being used as a cracker feed due to higher natural gas prices throughout the second half of FY21.
The outlook for European Naphtha market remains positive for first quarter of FY22 as rising natural gas and crude prices could prompt refineries to prefer naphtha over LPG as the key cracker feedstock. The severity of winter across Europe could also determine the performance of naphtha in Q1 as LPG demand rises during peak winter as heating fuel impacting both the price and availability to the steam crackers.
For the Quarter Ending September 2021
Firm crude prices in the global market augured well for the Naphtha prices which remained strong during the 3rd quarter. Mid-quarter hurricanes Id and Nicholas sent shock in the feedstock market where hurricanes shunned total output by more than 90 percent at one time, however, the feedstocks output came gradually to stable levels within weeks. Naphtha prices spiked in late August and early September and measured at USD 670 per MT. Refiners improved operating rates after the damage assessment in the aftermath of turmoil left by hurricane Ida which devastated the southern states where most of the key refineries were located. Furthermore, severe conditions also halted the trade between USA and Asia in the Gulf region as the US forms a key supplier of Naphtha to Asia.
The Asian Naphtha market started the quarter on a decline as the crude prices dipped after surging in June. However, the Asian market rallied after the slumber of early July and pricing again took an upturn where CFR Japan prices crossed USD 700 per MT mark in Late July. Resurgence in the prices of Naphtha in the 3rd quarter came in the backdrop of firm crude prices and a significant decline in crude production in the US Gulf due to Hurricane Ida. Demand also showed an increase as the key Asian economies moved towards economic recovery after containing delta variant cases.
The supply has been termed as tight for quarter III in Europe where demand for Naphtha witnessed a substantial increase as market participants moved from costly LPG to Naphtha. Tight supply also meant that there was a decreased flow of arbitrage of Naphtha from Europe to Asia. Furthermore, firm crude prices kept upward pressure on the prices of Naphtha in major European markets. Prices of Naphtha in major European markets were assessed in the range between USD 650 -700 per MT between Aug-Sep.
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.