Demand for heavy full range naphtha remains strong as buyers take advantage of the recent weakness in Asian naphtha cracks, but views on the near-term outlook are mixed, market sources said Friday.
The Asian CFR Japan naphtha physical crack for H2 August delivery against front-month ICE Brent futures rebounded to $67.43/mt at Thursday's Asian close from a month-to-date low at $64.625/mt the day before.
Over the past two months, the CFR Japan naphtha crack has touched a low of $66.25/mt on April 23 and a high of $107.80/mt on May 24.
The current level below the $70/mt mark bodes well for South Korean buyers with condensate splitter units, as heavy full range naphtha appears more cost effective at present than condensates. However, if premiums for heavy full range naphtha rise, it could divert their focus to light crude oil.
In the most recent deal, South Korea's SK Energy was heard to have bought heavy full range naphtha for H1 August delivery to Ulsan at a premium of around $18/mt to Mean of Platts Japan naphtha assessments, CFR.
The cash differential for light paraffinic naphtha, for physical cargoes on a CFR Korea basis, stood at $6/mt at Thursday's Asian close.
"The alternative for condensates is light crude or heavy full range naphtha, but refineries seem to be focusing more on light crude," a regular buyer in South Korea said, adding WTI-linked light crude appeared affordable.
South Korean buyers need to sort out their requirements for splitter units as the deadline for US sanctions being re-imposed on Iran draws nearer, another market source said.
US sanctions on Iranian crude oil come back into force November 5. The US Treasury has instructed buyers to make significant cuts to their imports to be considered for sanctions relief. - Platts -