Asia naphtha premiums remain high amid demand loss from cracker cuts

* Petchem makers cut cracker runs first time since 2008
* Lower volumes of naphtha into Asia help support prices
* Naphtha premiums more than 18 times higher than year ago

By Seng Li Peng
SINGAPORE, Jan 14 (Reuters) - Asia will lose more than
300,000 tonnes of naphtha demand this month as petrochemical
makers cut output to combat weak margins, but refinery
maintenance is reducing supply of the plastics and chemicals
building block, holding premiums steady.
Run cuts at crackers - units that break down naphtha into
components to make plastics and chemicals - have historically
pulled spot prices for the feedstock into discounts to benchmark
prices in Japan. The last time petrochemical makers took such a
step was during the 2008 financial crisis.
But a number of refineries are now in turnaround in the
Middle East, Asia's top naphtha supplier, underpinning prices
for the product.
"The several refinery turnarounds in Saudi Arabia and
(United Arab Emirates) will lower (Middle Eastern) exports and
offset some of the demand reduction due to cuts in crackers
runs," said Matthew Chew, principal oil analyst at IHS Markit.
Saudi Aramco Total Refining and Petrochemical Company
(SATORP), for example, has said it will conduct scheduled
maintenance on Train 2 units from Jan. 13 to Feb. 29.

Abu Dhabi National Oil Company (Adnoc) as well said in a
statement last month that its Ruwais facility would undergo
routine maintenance in early 2020.
Naphtha traders have said at least two more facilities in
Saudi Arabia, Rabigh and Ras Tanura, are also scheduled to
undergo maintenance in the first quarter. This could not be
confirmed with Saudi Aramco, which has declined to comment.
The effect of these turnarounds is reflected in data from
Refinitiv Oil Research showing that Middle East naphtha slated
to arrive in North Asia and Singapore in February is about 1.8
million tonnes so far, sharply lower from January's scheduled
volumes of almost 2.3 million tonnes.
That has helped to hold naphtha spot premiums relatively
high, with benchmark open-specification grade sold to Yeosu,
South Korea, last week at about $18.50 a tonne to Japan quotes
on a cost-and-freight (C&F) basis.
Although this was down nearly 40% from multi-year highs of
$30 a tonne in October, it was more than 18 times higher versus
the same period in 2019. O/NASIANAP
"People often say the naphtha market is weak. But South
Korea paid an $18.50-a-tonne premium ... how is that weak?" said
an industry source who tracks deals.
Naphtha crackers across Asia, including in South Korea,
Japan, Indonesia, Singapore and Malaysia, have cut runs by
5%-10%. The Philippines has decided to extend the shutdown of
its sole cracker following planned maintenance. O/ACRACKER

This translates to a net demand loss of 300,000 to 350,000
tonnes for January, said Sri Paravaikkarasu, director for Asia
oil at consulting firm FGE.
Chew of IHS estimated the demand loss this month at 100,000
to 200,000 barrels per day (bpd) (approximately 11,100 tonnes to
22,200 tonnes per day).