Asia Pacific Naphtha Prices Continue to Surge Despite Softening Crude Oil Prices

Naphtha swaps remained strong, in spite of the weak petroleum complex. The refining margins for non-Russian naphtha in Asia against Brent are once more rising. According to analysts, flows of non-Russian naphtha from Europe are anticipated to decelerate to a trickle for March and April while the east-west differential continues negative, albeit marginally at -USD 2.50/mt.

Russian naphtha is anticipated to discover an appropriate place in Asia as the supply drops to 1 million mt in March, with Mediterranean supplies moving north instead. Paper cracks in the month ahead are still higher and close to seven-month highs. One transaction was heard on the physical market at USD 734/mt CFR Japan, in which BP sold to Sietco. As a result, the outright increased for a third straight session, and the USD 2.25/mt gain brought it close to a seven-month record of USD 726.75/mt.

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Although falling crude oil prices, naphtha prices are rising in the Asia Pacific region. As global supply tightened, traders shunned Russian-origin cargoes, and arrivals from the West decreased, Asia's naphtha markets gathered steam this week, achieving gains of nearly 32% and echoing Northwest Europe markets.

The backwardation stretched to its widest level in almost 11 months, USD 20 per tonne, while the crack increased by USD 10.70 to USD 101.63 per tonne. On physical markets, 50,000 tonnes of naphtha for the first half of April and May loading were traded.

According to analysts and traders, the markets are awaiting more clarification of the rules governing the price cap on Russian naphtha.

Although the real demand for Russian diesel is in Europe, Russia will not have any trouble rerouting its lower-quality products like naphtha, gasoline, and fuel oils. Instead, Russia will need to find new markets and/or ways to blend its products.

Inventories

According to Insights Global statistics, naphtha stockpiles at the Amsterdam-Rotterdam-Antwerp (ARA) commercial hub fell to 244.000 tonnes in the week ending February 16 while gasoline stocks remained unchanged at 1.436 million tonnes.
The 150,000-bpd crude distillation unit (CDU) at the Hokkaido refinery of the Japanese oil refiner Idemitsu Kosan Co 5019 was shut down on February 14 owing to a technical issue.

In 2023, economists predict that China will import a record amount of crude oil due to rising gasoline consumption as more people travel as a result of the removal of COVID-19 regulations and the startup of new refineries.

Investors’ Concerns Over Rate Hikes Cause a Drop in the Price of Crude

Although a resurgence in Chinese demand and a weaker dollar offered some support, oil prices fell during Asian morning trade as investor jitters over potential future interest rate hikes continued to worry markets. Around 0132 GMT, the price of Brent crude futures was USD 82.63 per barrel, down 15 cents, or -0.18%. WTI crude oil futures (WTI) fell by 9 cents, or -0.12%, to USD 76.59 per barrel.

According to market experts, market sentiment was unstable due to concerns about additional Fed tightening of monetary policy being worsened by rising crude oil stockpiles in the U.S. on Monday morning. Oil prices were supported by a weakening dollar, which lowers the price of oil for holders of other currencies.

The bankruptcy of Silicon Valley Bank and New York-based Signature Bank, as well as worries about potential contagion, caused a selloff in U.S. assets at the end of last week, which has pushed the dollar down. In Monday's early Asian trading, the dollar index fell 0.2%

The sluggish start to the week for oil indicates a slowing of the upward trend that began on Friday after positive surprises in the U.S. jobs figures. According to a Reuters survey, the nonfarm payrolls increased by 311,000 in February, exceeding estimates of 205,000 new positions.

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As per Procurement Resource, Naphtha exchanges continued to be strong, in spite of the fragile petroleum industry. In Asia, the margins for refining non-Russian naphtha against Brent are once more increasing. Analysts predict that during the months of March and April, non-Russian naphtha exports from Europe will slow to a trickle while the east-west differential remains negative, albeit slightly, at -USD 2.50/mt.

Russian naphtha is expected to find a suitable location in Asia as the supply falls to 1 million mt in March, with Mediterranean supplies flowing north instead. The month ahead will see paper cracks rise even more and approach seven-month highs. On the physical market, BP sold to Sietco in one transaction for USD 734/mt CFR Japan. The outcome was that the outright rose for a third straight session, and the USD 2.25/mt gain got it very close to a seven-month high of USD 726.75/mt.