Trading company Vitol bought a further two 12,500 mt cargoes of naphtha on Friday, taking its total February purchases to 150,000 mt, the largest monthly amount bought by an individual company during the Platts Market on Close assessment process since 2005.
Since February 1, Vitol has booked eleven 12,500 mt CIF NWE naphtha cargoes for February delivery dates. Previously, they also booked a cargo on January 19 for February delivery, taking the total booked for the month so far to 12 cargoes.
Eight out of the twelve cargoes have been bought for 20-24 February delivery dates, with Vitol confirming that it is its intention to discharge at least some of the oil into an LR2 vessel carrying around 75,000 mt to take to Asia.
Vitol also said it had an additional LR2 vessel booked to ship naphtha to Asia for February 26-29 delivery dates in order to fulfill contractual obligations in Asia.
Vitol's strong buying has meant that petrochemical companies have been selling naphtha to the trading firm rather than keeping the material in their own petrochemical systems.
Dow has sold three cargoes to Vitol for February 20-24 delivery dates, while BASF has sold one cargo to Vitol for the same period.
A result of Vitol's strong buying has been a steepening of the backwardation in the market, with Platts assessing the February/March CIF NWE spread at $20.50/mt on Friday, $2.50/mt stronger on the week.
Sources questioned the economics of sending material to Asia, suggesting the move would result in selling product into Asia at a loss against the MOPJ regional benchmark, considering higher freight costs and the fact that full range is trading at higher premiums than the paraffinic naphtha that the company has bought.
Traders said that Vitol had built up a substantial paper position and had been very active in buying the February/March spread in recent weeks.
"I have never seen such a huge position on naphtha," said one trader.
Vitol declined to comment on the matter Monday.
Another result of the strong buying has been a surge in the outright price of naphtha, which has continued to eat into petrochemical margins.
Platts assessed CIF Northwest European naphtha cargoes at $1,018.50/mt on Friday, the highest level since May 4.
The current buying by Vitol is the biggest of its kind since Petroplus booked 24 cargoes in March 2005.
Petroplus had begun bidding in the market on March 1 of that year, anticipating homes for cargoes on the shutdown of Tees refinery, a trading source said. They opened the month by booking five 12,500 mt CIF NWE naphtha cargoes, and proceeded to buy 24 cargoes up until March 30.
However, the position "unraveled" as the company ran out of credit and had to sell cargoes back, the trading source said.
