Global Naphtha Prices Gain Stability After a Consistent Pricing Rally With High Crude Oil Costs

During the second last week of September 2023, the U.S. energy market witnessed a notable stability in Naphtha prices, attributed to a delicate balance between supply and demand of Naphtha. Simultaneously, the upstream energy sector experienced a significant surge in Crude Oil prices, marking a rise of approximately 1.8% over the course of the week. This increase in Crude Oil prices was primarily ignited by concerns over a tightening supply outlook, partly driven by Moscow's temporary ban on fuel product exports, including diesel and gasoline. However, investors maintained a cautious stance, keenly monitoring the evolving dynamics, particularly in light of potential interest rate hikes that could dampen overall demand. U.S. West Texas Intermediate crude futures mirrored this sentiment, extending gains for a fifth consecutive week and trading at approximately USD 90.3 per barrel.

In the European Naphtha market during the same period, stability also prevailed, largely attributed to a balanced gap between demand and supply of Naphtha. This equilibrium likely resulted from various factors, including production levels, consumption patterns, and market expectations. In contrast, Crude Oil prices in Europe experienced a 2% increase during the week, reflecting a shift in the supply-demand balance. The surge in Oil prices was driven by concerns over a tightening supply outlook, primarily due to Moscow's decision to temporarily ban the export of fuel products like diesel and gasoline. This reduction in supply, combined with ongoing global demand, pushed Crude Oil as well as Naphtha prices upward. Investors remained cautious in their approach, particularly with regard to potential interest rate hikes. The increase in Crude Oil Brent prices, which continued to rise for a fifth consecutive week, reached approximately USD 93.8 per barrel, reflecting the overall sentiment of a tightening global oil market and the Naphtha market.

Meanwhile, there was a notable uptick in prices in the Saudi Arabian Naphtha market, with a roughly 1.2% increase during the second week of September 2023. This increase mirrored a larger trend in the international market, where upstream Crude Oil prices surged by approximately 1.8% and impacted the Naphtha prices in the country. The primary driver behind this surge was the anticipation of supply tightening, which took precedence over concerns regarding slowing economic growth and increasing U.S. inventory levels. One significant factor influencing the upstream Crude Oil market was the joint commitment of major oil-producing countries, Saudi Arabia and Russia, to extend their plan to reduce crude oil supply by 1.3 million barrels per day until the end of the year. The sustained supply gap created by this production reduction has been significant, raising concerns about tight crude oil supply in the fourth quarter.

Lastly, the refined Naphtha prices displayed signs of stability during the second last week of September 2023 in the Chinese market. The early days of this week witnessed fluctuating and rising Chinese Naphtha prices, closely linked to the upward trajectory of international crude oil prices. As terminal restructuring was on the verge of being implemented, refineries were in full swing with their shipping activities. However, intermediaries and market participants exhibited a cautious and wait-and-see approach, possibly in anticipation of further market developments. Interestingly, over the last two to three days of the week, there was a marginal decline in prices, ultimately resulting in an overall equilibrium in Naphtha pricing.

According to ChemAnalyst, the price of Naphtha may increase in the upcoming week due to the tight availability of Crude Oil in the International market.