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Asia naphtha-propane spread dips to 7-month low on steady LPG prices

https://www.chemnet.com   Nov 02,2011 Platts
The price spread between Platts assessed front-month Mean of Platts Japan naphtha swaps and CFR Singapore-Japan propane cargoes for delivery 30-45 days forward, crunched to a seven-month low Monday, on firm LPG prices and a weak naphtha, Platts data showed.

Led by firm propane prices as the market goes into peak heating demand season and a lackluster demand for naphtha in the East, the spread between November MOPJ naphtha swaps and first-line CFR propane slipped to $61/mt Monday. The last time that the spread settled any lower was at $52/mt on March 31, the data showed.

The price spread between November MOPJ naphtha swaps and first-line CFR butane also narrowed to $1/mt Monday, a five-month low.

Led by a strengthening swaps, prices of propane and butane cargoes for second-half November delivery rose $11/mt and $16/mt from Friday to $815/mt and $875/mt, respectively. November MOPJ naphtha swaps settled $3/mt lower from Friday to $876/mt.

"It looks like the temperature will begin to dip from here on, so demand for propane should start looking up," a South Korea based trader said late last week.

A Tokyo-based LPG importer, however, said that even as the temperatures have begun to dip, it's still warmer as compared with last year. "It'll take time for [domestic] sales to pick up."

Meanwhile, even as Tokyo-based trade sources said Friday that the temperatures in Tokyo had "drastically" dipped in the recent days, the Japan Meteorological Agency said Friday in its weekly forecast that all 12 regions in Japan are likely to experience above-average temperatures over October 29-November 28.

All 12 regions, from Hokkaido in the north to Okinawa and Amami in the southwest are forecast to experience temperatures above the 30-year average for the month ending November 28, the JMA said.

Meanwhile, even as it seemed that demand for propane from the petrochemical sector in Europe would continue well into November, a crunch in the spread between propane and naphtha in Northwest Europe has made the latter look more attractive to petrochemical makers.

Platts reported Monday that a recent uptick in propane buying from the petrochemical sector coupled with oversupply of naphtha in Europe, has led to the price spread between propane and naphtha in Northwest Europe to dip to its narrowest since June.

Platts assessed the November propane swap at a $58.75/mt discount to the front-month naphtha swap Monday. This is the narrowest price spread between the two regions since June 23, when propane was some $54.75/mt below naphtha.

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