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MOSCOW (MRC) -- The naphtha market in
northwest Europe (NWE) maintained its upward thrust in June as reduced flows
from Russia tightened availability amid buoyant petrochemical buying interest,
which has offset weak demand from the gasoline blending sector, said Chemweek.
The
average OPIS CIF NWE naphtha spot price in June rocketed up to USD341.70/metric
ton in June, a gain of USD94/metric ton or 24.6% from May, while the Brent
futures marker average of USD40.56/barrel (bbl) in June was up USD3.73/bbl or
9.2% from the previous month.
The naphtha crack flipped into positive
territory in June for the first time in 18 months, reaching a high of
USD1.10/bbl after starting the month at minus USD4.23/bbl, according to OPIS
data. The June/July backwardation widened as the month progressed, ending at
USD12.50/metric ton tipping from a contango structure in the first half of June
of around minus 43 cents/metric ton.
Low refinery runs in Europe and
fewer exports from Russia were attributed to tighter supply of naphtha, with
reduced imports from the US seen as a further contributory factor. “The main
bullish signal for naphtha which hasn’t really changed is supply,” says one
source. "Supply, supply, supply."
Naphtha loadings in the European
region, including northwest Europe, the Russian Baltic and Black Sea, other
Baltic, Mediterranean, and North Africa, fell to 2.23 million metric tons in
June from 3.12 million metric tons in May, according to data from IHS Markit’s
Market Intelligence Network (MINT) vessel tracking service.
Analysis of
Russian naphtha liftings from Baltic and Black Sea ports indicated that the drop
was sharply more pronounced for the Black Sea. Naphtha exports from Russian
Black Sea ports plunged 821,542 metric tons compared to the prior month to
355,000 metric tons in June, the equivalent of 10 long-range, 80,000-metric ton,
cargoes. The reduction came namely as Tuapse, a key supply hub for arbitrage
cargoes to Asia, shipped just 165,000 metric tons in June, a decline of 726,000
metric tons from May.
Russian Baltic naphtha exports decreased by 33,404
metric tons from May’s total to 768,100 metric tons in June. The Baltic terminal
Ust Luga, which accounted for 59.9% of Russia’s total naphtha exports in May and
is the main source of NWE naphtha imports, registered a 21,267-metric ton
decline to 673,100 metric tons in June.
The naphtha market in Asia, despite the return of its traditional refiner
sources in the Arabian Gulf and India over the month from turnarounds, continued
to exert a strong pull on cargoes from Europe with arbitrage volumes to Asia
little changed. Naphtha volumes in Europe loading for ports in Asia were tracked
at 922,800 metric tons in June, compared with 969,000 metric tons for
May.
Naphtha demand in Europe held firm in June with crucial support
coming from petrochemicals as gasoline/blending demand was very weak to
non-existent. Steam crackers have not reduced run rates as much as refineries
owing to the need for plastic hygienic products amid the COVID-19 pandemic,
according to IHS Markit analysts, and a strengthening ethylene and propylene
market in Europe have both helped keep cracker margins sturdy.
Ethylene
and propylene are feedstocks for producing polyethylene (PE) and polypropylene
(PP).
According to MRC's ScanPlast report,
Russia's estimated PE consumption totalled 595,170 tonnes in the first five
month of 2020, up by 10% year on year. Deliveries of all ethylene polymers,
except for linear low density polyethylene (LLDPE), rose partially because of an
increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP
shipments to the Russian market was 457,930 tonnes in January-May 2020
(calculated by the formula production minus export plus import). Deliveris of
exclusively PP random copolymer increased. |
