Kuwait Petroleum Corp has offered a term supply of full range naphtha over December 2011-November 2012 at a premium of $23.50/mt to the Mean of Platts Arab Gulf naphtha assessments, sources close to discussions said Thursday.
The company has not revealed its offer for light naphtha, but the grade is typically priced $1.50/mt higher than full range naphtha.
Market participants said Thursday that KPC's initial offer levels were a far cry from where buyers have pegged bids, with starting levels heard at premiums of $14/mt to MOPAG naphtha assessments for full range naphtha.
"It's too high given the poor market outlook, but I think the premium will be revised downwards," said one term buyer, adding that if premiums stay higher than $20/mt, then "we will have to consider to drop the cycle".
Another source echoed similar sentiments, saying the company would have to walk away from taking up term volumes as it would not be sustainable to pay out premiums of more than $20/mt.
"With the losses now on petrochemical products and margins so bad, it's difficult to justify to [the] management these premium levels, even if we did want to continue the term," the second source said.
Talks between KPC and its term customers started Monday in Singapore.
A poll of trading sources before the start of discussions had revealed premium indications of around the mid-teens for full range naphtha and high-teens for light naphtha.
A trading source had said then that the December-November cycle "should be the lowest priced of [KPC's] three cycles" due to uncertainty over market conditions in the new year.
In addition, broader concerns over the state of the global economy have also weighed on sentiment.
KPC's other 12-month term cycles are over August-July and April-March.
Both the August 2011-July 2012 and April 2011-March 2012 cycles saw KPC settling on premiums of $20/mt and $18.50/mt for light and full range naphtha, respectively, priced basis MOPAG naphtha assessments.
For the December 2010-November 2011 cycle, KPC had settled at premiums of $13/mt and $12/mt for light and full range naphtha priced to MOPAG naphtha assessments.
