Asia oil trade stalls on Russia, propane prices push up naphtha

Quantum Commodity Intelligence – The physical trade in Asia oil products markets largely ground to a halt on Thursday following volatile crude prices that rocketed on news of Russia's full-scale invasion of Ukraine.

With the exception of naphtha, oil product cash differentials were unchanged on the day amid bids and offers that were far away from Wednesday's prevailing values as traders were glued to news reports and the Brent trading screens.

In addition, paper cracks were broadly stable with swaps tracking the move in crude as traders waited for clarity on what market-impacting sanctions, if any, the west will deploy.

Both the EU and the UK have since warned of harsh sanctions on Russia following the incursion, but details have yet to emerge.

Reports suggest the very harshest of sanctions, such as blocking Russia from the Swift banking system, will not be deployed.

The exception to the dearth of physical trade was naphtha, where refining margins, measured by weight and not volume, hit the highest level since the pandemic began as European values rose over fears of disruption to supply from Russia, one of the Europe's biggest providers of the feedstock.

One physical trade was heard at $911/mt CIF Japan for H1 May loading with a spread trade done for H2 April and H2 May at $28/mt.

That left the cargoes assessed at $918/mt CIF and the crack versus Brent at $185/mt, up almost $7/mt on the day to a fresh pandemic high.

The move for naphtha was also supported by price rises in alternative feedstock LPG, with propane swaps for March pegged at $865/mt, up around $38/mt on the day on the back of gas prices which have surged on fears that Russia may turn off the taps.