Asia light-end round up: Cracks continue to rise as stocks fall

23 Jul 2021

Quantum Commodity Intelligence – Naphtha cracks rose 5% over the course of the week as the start up of new crackers in South Korea, a narrower arb in Europe and lower stocks in Singapore continued to underpin value.

Cracks rose 5% on the week from $138/mt to $145/mt, according to Quantum data, the highest crack in more than five years as flat prices rose to $682.50/mt basis CIF Japan, up just $5/mt on the week.

The rise comes on the back of a five-week bull run after LG Chem and GS Caltex’s crackers in South Korea started back in June.

The higher prices in Asia come as narrowing arb economics from Europe also choke supply, with the front-month east-west spread narrowing from $15/mt to under $12/mt over the past week, according to broker data.

In gasoline, firmer cracks were also seen, albeit more marginally, as spot flat prices rose just $0.10/b to $82.40/b FOB Singapore for 92 RON.

Like naphtha, cracks have been in a bullish pattern since the start of June, although that has largely been driven by firmer US demand.

With spot cracks at $8.86/b, margins remain near multi-month highs as spot prices rise.

The August-September RON 92 spread has widened from $0.95/b to $1.55/b over the course of the week, as demand from India picks up and exports from China slow down.