The outright price for US Gulf Coast naphtha barges slid Tuesday to a low not seen since late 2008 on refiner selling in a move that points to interest in shipments of the refinery workhorse to Asian customers.
Platts assessed naphtha 4.73 cents lower day on day at 92.08 cents/gal on the back of a BP offer to deliver the product January 20-22 in Houston that found no buyer. The offer was for naphtha at an initial boiling point of 110 degrees and maximum 63 API, known in the industry as the Platts standard specification.
BP improved its offer to 10.75 cents below barge gasoline without attracting a sale and withdrawing it at about 2 pm CST
The product was assessed at the level of the withdrawn offer. The differential was down 2.65 cents compared with Monday’s assessment, with weakness in the underlying gasoline contract accounting for the rest of the fall in the outright price.
The spot price for naphtha hit a low not seen since an assessment at 79.03 cents/gal on December 30, 2008, during the global financial crisis.
The outright price had fallen for seven consecutive trading days through Tuesday and is more than 40 cents below the assessment six months ago at $1.3244 on July 13, 2015.
LOOKING STRONGER IN THE SPRING
The contango structure in the gasoline market likely will keep naphtha heavier on the offer side for later delivery and differentials trending lower in the coming weeks, a US blendstocks trader said. BP’s offer is priced against gasoline in late January, but influenced the assessment for Tuesday against prompt gasoline.
“Last year, the market was massively [backwardated], and all the naphtha offers were in the front to capture the cash,” the trader said. “Now with the contango, we should see offers in the [back end of the market] to capture the strength in the cash and RBOB [futures markets].”
Barge gasoline is in contango of about 20 points/day through January 21, the midpoint of BP’s intended delivery dates.
“Just wait for the March-April roll at [a spread of] 22 cents,” the trader said. “You will see a ton of offers on the back end when that roll into the [Platts Market on Close assessment process delivery] timing.”
Gulf Coast gasoline is showing a strong contango into early February, but values beyond February 20 are harder to determine, a US refined products trader said. Recent moves in prompt 87-octane gasoline have held considerable sway over the structure in Gulf Coast markets, he said.
ASIA SEEKS US PRODUCT
Meanwhile, according to shipping market sources, there has been ongoing interest to move naphtha from the US to Asia amid the fall in prices on the Gulf Coast.
“It seems like the naphtha arbitrage may be open, and that’s adding some cargoes up to [January 25],” said a source.
He said charterers such ST Shipping, Noble, Idemitsu and Shell were looking to move product eastward on medium-range tankers carrying 38,000 mt. Already, three Long Range 1 tankers have been placed on subjects since the end of last week to move naphtha from the Americas to Asia for laycans around January 20-23. It takes almost a month to ship product from the Gulf Coast to Japan.
According to shipping sources, the Estia and the Marinor are currently on subjects to move 54,000 mt naphtha cargoes to Asia, while PMI has placed the Energy Centaur on subjects to move product from the east coast of Mexico to Japan — its second such fixture for the month of January.
“Indeed, a few boats were fixed for the arbitrage to the East,” the blendstocks trader said.
The increase in interest in shipments from the Gulf Coast and Mexico to Asia comes as Northwest Europe naphtha barges fell to a seven-year low on a smaller pull from Asia customers.
The CIF Northwest Europe naphtha physical cargo was assessed at a seven-year low of $320/mt Monday.
Naphtha is one of the most versatile parts of the refinery production chain. It can be used for gasoline blending, as crude diluent, for denaturing ethanol and as petrochemical feedstock, among other applications.
