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In Asia naphtha spot prices are likely to fall sharply this week

October 31/2011

(ICIS) -- Asias naphtha spot prices are likely to fall sharply this week, with crack spreads and inter-month spreads already weakening amid surplus, squeezed margins and falling prices for key petrochemical products, traders said on Monday.


Continued deceleration in China, the worlds second biggest economy, sparked worries over the plastic demand outlook for next year. In response to the bearish situation, some regional producers have begun to rein in operating rates.


The market is bearish currently. The market will be weak until the end of the year. The economic policy of China, in terms of financing, will be important, said a trader in northeast Asia.
The open-spec Asian naphtha contract for the first half of December fell by $18.50/tonne (?13.14/tonne) from Fridays close to $858.00-861.00/tonne CFR (cost and freight) on Monday midday, partly because of weaker global crude futures ahead of the G20 summit later this week, ICIS data showed.


The naphtha crack spread versus December Brent crude futures plunged to $30.38/tonne on 25 October, the weakest since 8 January 2009. The crack spread was assessed at $36.50/tonne on Friday versus $64.28/tonne on 21 October, the data showed.


The spread between the contracts for the first half of December and the first half of January weakened to a contango of $2/tonne on Friday, as compared a backwardation of $2/tonne in the week earlier.


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