The international naphtha market continued to see shocking strength unfold. There has been decent buying in the NWE naphtha spreads, compared to the likely profit-taking flow in the East, although both markets have been quite quiet in the fortnight. Weaker crude was helpful for the cracks, although this has now been reversed with a stronger crude print. Petchem buying has supported both regions. Chinese funds selling the PX-MOPJ spread have supported the Asian naphtha as they sell this in anticipation of further economic issues. Petchem flow has been really important in supporting prices in the past two weeks. There was significant buying in the Euro Cal’25 crack by trade houses, likely for ethylene hedging, which drove prices up as the NWE propane complex continues to be extraordinarily strong. In the East, the Bal-Aug/Sep MOPJ also strengthened due to propane’s influence as players sold into the E/W and MOPJ spreads.
It is also interesting to consider the impact of refineries in Asia running max jet fuel, which is seeing great strength when compared to Asian gasoil. This cuts the yield of naphtha from the refinery as it enters the jet blend. This may be less prominent in European refineries as European jet demand has been weak.
The Oct’24 NWE naphtha crack experienced significant selling in the past two weeks, with prices peaking at over -$4.20/bbl on 21 Aug amid MOPJ MOC bidding, weaker crude and heavy gasnaph selling. Refiners sold a net 477kb of the Oct’24 crack to Onyx, including 210kb on 23 Aug as the crack dropped by 20c/bbl. Trade houses have also been active sellers, holding substantial short positions in the Bal-Aug and Sep’24 contracts, totalling around 9mb.
The Oct’24 naphtha East/West (E/W) spread peaked at $19.75/mt on 23 Aug, driven by stronger MOPJ compared to NWE. Banks sold 92/MOPJ while majors bought 44kb of the Oct’24 E/W on 21 Aug and held their position.
Asian and European Q4’24 refinery margins declined over the fortnight, with the European margin dropping by 94c/bbl, mainly due to weak product performance. NWE naphtha only contributed a minor 2c/bbl loss, while EBOB was the main drag on the European margin, contributing $1.25/bbl to the decline. In the East, despite some support from Dubai crude, weak products, particularly Asian gasoline, led to significant margin losses. This highlights the contrast between naphtha strength and gasoline weakness this summer.
