India Sept naphtha exports steady around 850,000T.

India will maintain its September naphtha exports around 850,000 tonnes, keeping fundamentals balanced amid healthy demand and lower supplies expected from the Middle East in October due to maintenance at splitters in the UAE, traders said on Friday.

But most traders polled stood by their bearish views and are expecting the uptrend in Asia to be short-lived and that Indian premiums could not continue to spike.

“Fundamentals have not changed that much. The market has gone up more than it really should have,” said a Singapore-based trader.

Cracks, the premiums/losses obtained from refining Brent crude into naphtha, jumped to a 2-½ week high on Thursday at $114.58 a tonne premium, versus the lowest for the year on July 19 at a $50.60 a tonne premium.

Indian monthly exports have been largely steady around 820,000-860,000 tonnes since May, but sentiment slumped after about 1 million tonnes of Middle Eastern naphtha were sold for July-August loading in the spot market. So far, Saudi Aramco, ADNOC, Tasweeq and Kuwait Petroleum Corp (KPC) are among the Gulf producers that have already sold more than 500,000 tonnes of spot naphtha for September loading.

RECOVERY SEEN SHORT-LIVED

Sentiment recovered dramatically in the last two weeks, supported by maintenance at ADNOC’s splitters, while Taiwan’s Formosa Petrochemical bought 200,000-230,000 tonnes for September arrival in a span of about a week despite the continued shutdown of its 700,000 tonne-per-year (tpy) No. 1 cracker. The facility in Mailiao had been hit by a fire in early July. ADNOC will shut its two condensate splitters for maintenance in October — one for a month and another for 10 days. This would cut its export volumes by 150,000-170,000 tonnes during the shutdown period.

India’s steady export volumes for September will help offset the cuts in ADNOC exports.

“But the market overreacted to those news,” said a North Asian trader.

Indian premiums are in the range of $14.00-$16.00 a tonne to Middle East quotes for cargoes slated for September liftings versus mostly single-digit premiums or discount levels for parcels scheduled for August loadings.

“The strength you see in the market is due to short-coverings, and it won’t last. Sentiment will soften ahead,” said another North Asia trader.

The strong sentiment was also driven by the tightly shut West-East arbitrage window after more than 1 million tonnes of naphtha arrived in Asia between May and July.

But it could reopen as the Asian open-spec naphtha differential to Northwest Europe prices are at $25.50 a tonne on Thursday.

The West-East arbitrage door technically opens when Asian prices are around $27.00-$28.00 a tonne above levels in Northwest Europe, although traders also have to consider freight rates.

“Despite all the bullishness in the past few days, I don’t see Asia being in short supplies. Fundamentals are more or less, balanced,” said another Singapore-based trader.

Source : kippreport.com