VINACHEM

The first-half November naphtha contract rose by $13.50-14.50/tonne (€10.40-11.17/tonne) from Thursday to $969.50-972.50/tonne CFR Japan on Friday morning, according to ICIS data.

The arbitrage window – the economics to draw European barrels to Asia – is now closed, because of rising European naphtha last assessed at $953-955/tonne CIF (cost insurance freight) NWE (northwest Europe), the data showed.

“Europe is strong so that means no arbitrage from Europe and Asia is in short balance,” said a trader.

Asia is unlikely to receive further deep-sea flows from northwest Europe and the Mediterranean, after 250,000-300,000 tonnes of European naphtha was booked to arrive in Asia between the end of October and the first half of November

The volumes were paltry compared to the 500,000-700,000 tonnes of European naphtha supplies that landed in Asia from August to September.

The US crude futures were driven up by a strong rally in gasoline, the euro shifting higher against the dollar on upbeat eurozone news and geopolitical forces such as the tension between Iran and the west.

Further support for crude was generated by an unexpected 2.4m bbl fall in US crude inventories, and unexpected 0.5m bbl declines in gasoline and distillate stocks, according to weekly data from the Energy Information Administration (EIA) released on Wednesday.

It is expected that European naphtha supplies will be increasingly diverted into the gasoline blending pool, further dampening the chances of naphtha arbitrage flows to Asia, traders said.

The Asian naphtha crack spread against November crude futures strengthened to $129.68/tonne on Thursday – the highest since 12 September, while the backwardation between the first-half November and the first-half December naphtha contracts held steady at a steep $12/tonne, ICIS data showed.

India’s Bharat Petroleum Corp Ltd (BPCL) sold by tender a 35,000-tonne naphtha cargo at a higher premium, reflecting firmer fundamentals.

BPCL sold the cargo for loading from Mumbai on 22-24 October to Japanese trading house ITOCHU at a premium of $34.00/tonne to Middle East quotes FOB (free on board).

In its previous tender, BPCL sold 30,000 tonnes of naphtha for loading from Kochi on 17-21 October to Total at a premium of $30.00/tonne to Middle East quotes FOB.

($1 = €0.77)