(Financialexpress, Sept 28, 2006) Prices for naphtha in Asia may extend their decline relative to crude oil as Indian refiners boost exports and chemical plants shut for maintenance.
India¡¯s exports rose 75% in August from a year earlier to as much as 7,00,000 metric tonne, according to a survey of three naphtha traders.
 
Refiners in the country have shipped more naphtha, a crude oil product used to make chemicals and gasoline, as they expand capacity and power plants switch to using liquefied natural gas (LNG) for power generation, they said.

¡°Prices could fall further in the near term, as there is no indication of a decline in Indian exports,¡± Jason Lee, a trader at Singapore-based Trafigura AG, said. ¡°High refinery run rates have also led to an inventory-build in Japan and South Korea, damping demand.¡±

Shipments may rise further after Essar Oil Ltd, an Indian fuel retailer, starts an export-oriented refinery in October.

Prices for naphtha in Japan, an Asian benchmark, have plunged 23% to $529 a metric tonne since reaching a record $688 on July. That¡¯s outpaced the 19% drop in Brent crude prices over the same period.

Companies including Japan¡¯s Idemitsu Kosan Co and Taiwan¡¯s Formosa Petrochemical Corp have shut naphtha crackers, plants that turn the fuel into the chemical ethylene, for scheduled maintenance.

Next month, Yeochun NCC Co, South Korea¡¯s largest ethylene maker, will close a plant for an overhaul. It takes about three tonne of naphtha to make one tonne of ethylene, the basic building block of plastic packaging, water bottles, and synthetic fibers.

The start of Essar¡¯s 2,20,000 barrels a day refinery at Vadinar, in Gujarat, may boost the country¡¯s exports by as much as 90,000 tonne a month, traders said.

Naphtha will account for about 15% of the refined products made by Essar, which has no plans to sell the fuel to local buyers.

Naphtha exports have also climbed because the country¡¯s refiners are using less of the chemical raw material to make gasoline as profit from processing naphtha into gasoline shrank.

The reforming spread, or gasoline¡¯s premium to naphtha, has tumbled 75% from the May 15 record of $25.60 a barrel for 92-RON gasoline.

Still, regional supply of the chemical feedstock may soon fall as Japanese and South Korean refiners cut output. Japan¡¯s refiners operated at 82.2% of capacity, down from 86% the week ended September 16, the Petroleum Association of Japan said on its web site.
Source:Financialexpress
tag:China energy oil