There has failed to be a strong narrative driving both regions in the naphtha complex. In Europe, stop-out flow was joined by heavy selling, which saw the spreads, both deferred and prompt, alongside crack selling down the curve. The last week of November was also likely pressured by significant selling from a major as we approached pricing, which was supported by a wide array of sellers. The previous support from the Cal crack buying dissipated, and there was better selling in both 2025 and 2026. The MOPJ spreads weakened, too, but to a less significant extent with some backend physical buying.
The Jan’24 NWE naphtha crack fell sharply from -$3.15/bbl on Nov 21 to -$4.35/bbl by Dec 3, driven by persistent weakness and aggressive selling. Open interest in the Jan’25 crack reached the 5-year average of 11.8mb on Nov 29. Majors flipped short on Nov 27, selling 400kb, while trade houses sold 1.7mb to Onyx over two weeks.
The naphtha East/West (MOPJ vs NWE naphtha) saw strong selling flows, with trade houses increasing their short position from 1.3mb to 1.9mb between 08 and 18 Nov, alongside 336kb of selling from refiners and majors/NOCs. Since early November, the Dec’24 East/West has declined from $21/mt to $18.50/mt, with a current 7 day long:short split of 45:55 for Dec’24.
The M1 TC5 freight (from the Middle East to Asia) has seen relatively tame moves compared to recent months. The M1 TC5 freight contract peaked at $33.00/mt on November 21-22 before easing to $31.90/mt by December 2. Meanwhile, M2 and Q1’25 tenors showed more resilience, peaking at $33.50/mt and $33.35/mt on November 29 before slipping by around 65c/mt. This decline likely reflects the fading geopolitical risk premium as the Hezbollah-Israel ceasefire, announced on November 27, had already been priced into the market in prior weeks.
South Korea’s Ministry of Economy and Finance announced its 2025 flexible tariff plan on Dec 2, extending the zero tariff on crude oil for naphtha production to support the struggling petrochemical sector. Zero tariffs will also apply to naphtha and LNG during winter, and LPG tariffs will remain at 0% through mid-2025. The plan includes adding key semiconductor and display materials to the flexible tariff list.
South Korea’s 900,000mtpa Lotte Chemical cracker no.2 has shut. This mainly producers ethylene glycol and other ethylene derivates. The no.1 naphtha cracker is running at 75% of its 1.18million mtpa capacity of ethylene.
