The lightest waterborne naphtha assessed by S&P Global Platts traded at a three-month high over natural gasoline Wednesday on pull for the feedstock for Asia petrochemicals demand, market sources said.
"I'm hearing the light naphtha arbitrage is open," a US light ends source said. "The heavy arb is open too."
Light straight run naphtha barges FOB Houston at high sulfur and at 83 API for late June were heard traded at the equivalent of June Mont Belvieu, Texas, natural gasoline plus 6-7 cents/gal. That compares with an assessment at 3.75 cents over natural gasoline Tuesday, with the Wednesday assessment coming later in the day.
The last time LSR naphtha was higher against C5 came March 22 at a 6.15-cent differential during the last days of blending for winter gasoline at double-digit RVP. LSR, at 13 RVP, is considered better suited for blending at higher RVP. LSR naphtha sometimes is referred to as paraffinic naphtha.
"Paraffinic naphtha has been tight in the East for several months and now in the Gulf Coast light blending should be tapering off, and Canadian diluent is pretty weak versus C5," a US trader said of the widening arbitrage.
SWEETER NAPHTHA LOOKS STRONGER
LSR ahead of the Platts laycan of June 16-July 6 has been heard to trade in differentials in the high single digits above C5, pointing to even stronger prompt demand. A parcel of low-sulfur LSR was heard to trade at 10 cents over C5.
S&P Global Platts pegged freight on the USGC-Japan/South Korea run at $1.05 million for 38,000 mt cargoes and at $1.3 million for LR1 size cargoes of 60,000 mt Wednesday, or at $27.63/mt and $21.67/mt, respectively.
There appears to be one LR1 cargo that is asking questions for a June 15-20 laycan on the US Gulf Coast, according to a shipowner. "I have not seen anything sub-$1.3 million, but that may not be out of the question," the shipowner said. "I don't think that it is so much the draw to Asia on the naphtha."
Yet shipbrokers told of having heard speculations on several arbs this morning, but had not seen anything working yet. "There are plenty of LRs to pick from," a shipbroker said.
NAPHTHA OUT OF MEXICO
Most recently BP fixed the Gulf Rastaq on subjects to carry 38,000 mt of light straight-run naphtha from Coatzacaoalcos on Mexico's East Coast to the Far East at $1 million lump sum loading June 4-6.
Subsequently P667 was seen placing the CPO New Zealand on subjects to load 38,000 mt of gasoline blendstock at Los Angeles and carry to the Far East, most likely China.
Light naphthas got a lift this spring from Asia customers.
Barge LSR is virtually identical to its basis product: cavern-stored natural gasoline at Mont Belvieu. Market sources have pointed to more C5 being loaded onto barges recently in the Houston Ship Channel.
Not every C5 market on the continent is seeing stronger support.
"It's pretty strong right now," a North American light ends source said. "That's why I'm surprised I am seeing Edmonton [Alberta] C5 so weak."
Heavy naphtha was weaker despite the Asia pull. Reformer grade barges CIF Houston at 58 API fell 4.70 cents Monday to barge gasoline minus 19.45 cents/gal on the back of a Valero offer for Platts standard naphtha, with the spread between the grades remaining unchanged at 1.75 cents. No fresh trades were heard Wednesday morning.
