Russian supplies could keep Asian naphtha markets subdued in H1 2023

NEW DELHI, Jan 12 (Reuters) – Asian naphtha markets are likely to remain volatile in the first half of 2023 as the region prepares to absorb Russian supplies following a European ban on oil products. Moscow on February 5, and demand from the petrochemical. still weak.

Traders and analysts expect some of the naphtha that Russia will not be able to sell to Europe after the ban ends up to Asia through Middle Eastern business centers. Europe, on the other hand, seems to get its supplies from the Mediterranean region.

Expected higher supplies in Asia amid trade changes could lower naphtha prices and clean up refiners’ finances. Naphtha prices fell 87% in 2022 to $21.13 a ton over Brent crude and prices fell nearly 13% to $647 a ton last year eat

Sales and prices are up slightly in January so far, driven by weaker crude oil prices, but the highs are remains limited due to poor petrochemical demand, analysts say.

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Russia will supply nearly 3 million tons (73,970 barrels per day) of naphtha to Europe in 2022, compared to about 2 million tons a year earlier, according to data from Kpler and FGE, as the product closes and buys their products.

“Make hay while the sun shines during the discount sale and get more supplies after the deadline,” said the senior analyst. of Kpler oil Kevin Wright, explains consumer behavior.

Russian exports to Europe fell by around 500,000 tonnes in January as trade moves to avoid the latest sanctions.

Russia’s exports to Asia were reduced in 2022 by about 868,000 tons to about 1.6-1.8 million tons, information Kpler and FGE. Kpler’s Wright hoped that would change.

“I expect Russian naphtha sales to Asia to pick up strongly in 2023, especially to India,” Wright said, with buyers pulling in heavy discounts for the goods.

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In terms of profits, analysts at Wood Mackenzie, FGE and Energy Aspects expect them to remain weak in the first half of the year after announcing an annual loss last year due to the weak Chinese demand due to COVID restrictions.

“Demand in China seems to be lower than in previous years because of the fact that the COVID seems to be raging there again, especially now that there are no restrictions, and this may affect the demand of naphtha import,” said Kpler’s Wright.

Adding to demand pressures, concerns that slowing global growth will further weigh on naphtha cracking.

“We have Singapore naphtha cracking at its weakest in the first quarter in 2023 and then gradually increasing again,” said Alan Gelder, vice president, refining, chemical and oil markets at Wood Mackenzie.

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Meanwhile, South Korea’s LG Chem and Taiwan’s Formosa Petrochemical ( 6505.TW ) extended the shutdown in response to poor naphtha margins in September to October last year, but others in the region reduced the cost of work, a situation that may continue in the first. half of 2023, say researchers and traders.

Formosa sees “no sign of recovery in demand” in the first half of 2023 due to rising inflation in the economy, company spokesman KY Lin told Reuters.

“There is hope in the market that the price may slow down in the second half of the year, the demand is only then,” he added.

Report by Mohi Narayan; Edited by Florence Tan and Simon Cameron-Moore

Our Principles: The Thomson Reuters Trust Principles.


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