The naphtha complex saw a strong start of the month before the buying in the East appeared overdone, and the propane and petchem market was also more tepid, although the naphtha market in Europe outstripped propane. The market in both regions corrected and has seen stronger selling in the cracks.
The Jan’24 NWE naphtha crack saw increased selling after an early December rally, with trade houses selling 458kb on Dec 10-12 before partially buying back to a total net short position of -4.5mb on Dec 16. Majors added 160kb to their net short position, now at 537kb, while spec traders hold 89kb long since early December. The Jan/Feb’25 NWE naphtha spread peaked at $3.75/mt on Dec 10 before falling to $2.25/mt on Dec 16 amid weakening European naphtha. Trade houses flipped positions, net buying 160kb to a total of 2.892kb, while banks added 356kb on Dec 2, bringing their net position to 667kb long.
The prompt naphtha East/West (MOPJ vs NWE naphtha) fell from $22.75/mt on Dec 11 to $21.25/mt on Dec 17 as the West strengthened. Trade houses sold over 1mb to Onyx, while refiners and hedge funds sold 275kb and 90kb, respectively. Open interest rose to nearly 10.0mb on Dec 13, 800kb above the 5-year average.
Open interest (OI) in the naphtha complex reveals that market participants are deploying significantly higher amounts of risk relative to historical levels. Only OI in the Q3’25 naphtha swaps is lower than the 5-year average, and even that is only by 8%. OI in the Q2’25 gasnaph declined by 14% over two weeks, but levels remain nearly 400% above the 5-year average.
The M1 TC5 freight (from the Middle East to Asia) has fallen by 15% in the past two weeks, from $31.91/mt to $27.05/mt, as levels fall below the lows reached in mid-November. This is part of a wider trend as freight rates decline, as an increase in vessel availability has exceeded the limited demand in tonnage.
Poland’s Orlen announced it will scale back its Olefins petrochemical project, delaying production until at least 2030 and aiming to cut costs by up to a third. Originally begun in 2021, the project faced soaring costs, write-downs, and heavy losses, with 12.6 billion zlotys ($3.10 billion) spent by September.
Lotte Chemical Titan Holding Bhd will temporarily shut down its Naphtha Cracker Number 1, with a capacity of 430,000 mt per annum, starting Dec 15, 2024, due to prolonged negative margins. The company expects overall plant operations in Malaysia and Indonesia to run at 55%-60% capacity in 2024, with the cracker resuming operations when market conditions improve.
