Asia light end cracks hit 1-month high on tight European naphtha supply

London, (Quantum Commodity Intelligence) - Asian naphtha refining margins surged on Tuesday after European prices rose over the long weekend, narrowing the so-called east-west spread and slowing supply of naphtha from Europe to Asia.

The spread – essentially the price difference between naphtha in Europe and Japan at 08:30 Singapore time - narrowed from $10.5/mt on Monday to just $9/mt on Tuesday, meaning the profits from exporting the gasoline and petchem feedstock east are narrowing.

That prompted some spot buying of naphtha on Tuesday, with one transaction heard at $612/mt CFR Japan for delivery in the second half of June and a steep $8.50/mt backwardation in the physical market between 2H June and 2H July.

With quantum assessing spot naphtha delivery up $18/mt on the day at $605.75/mt to outstrip firmer crude oil, the spot crack versus July cash Brent rose above $100/mt for the first time in almost a month.

That triggered a flurry of gasoline trades, with RON 92 and RON 95 gasoline cracks on a spot basis also rising to the highest since 7 April at $7.98/b for the former and $9.15/b for the latter.

The rise in cracks come amid the continuing outbreak of covid in India that has stunted gasoline demand growth, with gasoline sales in April down 13% on a month earlier and 4% on April 2019 levels.