Limited consumption and demand crunch tumbles the Global Naphtha market

With the week ending on 09th Feb, the global Naphtha market saw a decline as major market participants maintained ample inventories. Additionally, Naphtha prices remained steady in the Chinese market throughout the holiday season, with preparations for the Lunar New Year suggesting a willingness to further decrease production. In the US, Naphtha prices followed a downward trend due to sluggish demand domestically and internationally, along with the accumulation of inventories among the storage units.

Naphtha prices in the US market had decreased by almost 3%, from USD 585/MT to USD 568/MT in week ending on 9 Feb 2024. According to the EIA report on February 9th, U.S. commercial crude oil inventories had increased by 12.0 million barrels from the previous week ending on 2 Feb 2024, resulting in a decline in crude oil crack prices, leading to a further decrease in production costs and Naphtha prices. The downstream Propylene and Paraxylene market also experienced a decline in the wake of low market purchases and plunge in trading activities for the fresh stocks. The import of Naphtha from in Brazil from the US had generally proven to be more cost-effective than its Asian counterpart, attributed in part to stable logistics from the US. Throughout the week, there were no new volume allocations for future bookings. Projections suggested an increase in inventory, considering recent notices of price decline from producers. The reduction in prices was linked to the absence of demand at both local and global levels, and those holding unsold inventories until mid-February.

The prices of Naphtha in the Saudi Arabian market had declined by almost 3%, from USD 621/MT to USD 591/MT. As Saudi Arabia is one of the biggest producers and exporters of crude oil and crude cracks like Naphtha, the country unexpectedly kept oil prices low to ensure its market share, implying sufficient oil supply in the market and putting pressure on other oil producers. Crude output experienced the steepest drop in six months, with some members implementing voluntary cuts, and protesters shutting down Libya's largest field for more than two weeks. The production decline of Naphtha in Middle east was far less in Iraq, well above its quota in the influence of deteriorating demand and rising inventory level.

According to ChemAnalyst predictions, the prices of Naphtha in Saudi Arabia are expected to rise as Saudi Arabia's decision to postpone oil capacity expansion plans should not be interpreted as an assessment that demand for crude oil cracks like Naphtha is falling, potentially causing an increase in prices. Prices in Asia are also anticipated to increase, as drone attacks on Russian refineries and the Red Sea shipping crisis are projected to disrupt European shipments. Persistent geopolitical tensions in the Red Sea are expected to fan fears of supply disruption, even as trade remains thin due to the Chinese holiday week.