India June naphtha exports seen up to 750,000T; lower.

SINGAPORE, May 18 (Reuters) - India's June naphtha exports are seen lower at 720,000-750,000 tonnes versus 820,000 tonnes this month as supplies are diverted to a new cracker in Panipat, but Western barrels will help fill the gap, traders said on Tuesday.

Indian Oil Corp's (IOC) 850,000 tonne-per-year (tpy) new cracker in Panipat, in north India, began operations in March and also reduced the state refiner's export volumes. The cracker is expected to reach full production in two to three months.

"When they do run full, they will need some 200,000 tonnes of naphtha a month. But for now, they can run only at 50-60 percent capacity," said a South Asian trader.

At its current runs, IOC's cracker will soak up some 120,000 tonnes of naphtha a month, but lower domestic naphtha demand from power and fertiliser plants will prevent overall Indian exports from sliding below 720,000 tonnes.  My estimate is that India will still have up to 750,000 tonnes in June," said a Singapore-based trader.

The lower volumes are not expected to hit buyers, thanks to incoming Western barrels, which resumed their flows to Asia in May after a month's absence.

Cracks, the premiums/losses obtained from refining Brent crude into naphtha were at around $137.00 a tonne on Monday, down from $147.40 a tonne from a week ago.

TRADERS LOOK PAST LOWER IMPORTS

So far, some 200,000 tonnes of naphtha from Europe/Mediterranean are expected to land in Asia next month, and the demand is still able to soak up these barrels.

"There is some uncertainty in the market. But for now, there are still buyers willing to pay for (Indian) FOB barrels," said another trader.

One of the most recent sales out of India was from ONGC, which last week sold a medium-range cargo for early-June loading to Total at a premium of about $27.00 a tonne to Middle East quotes, FOB.

This was marginally higher than the $26.00 a tonne, FOB, it fetched in late April from Itochu for a parcel lifting end May from the same port, a reflection that the market is still holding firm.

Most Asian crackers, except for some routine maintenance in South Korea's YNCC, Japan's K Additional ethylene capacities in the Shell's Singapore complex and Thailand also contributed to strong naphtha demand.

But going forward, naphtha sentiment could spiral down rapidly if Asia becomes flooded with Western barrels.

"I think Western cargoes will keep coming due to lower demand in Europe and the United States," said another Singapore-based trader.

Source : REUTERS