SINGAPORE: Asia's naphtha crack hit a five-week high of $47.88 a tonne on Tuesday on expectations that demand for July-delivery cargoes would remain strong as petrochemical units run at high rates.
The persistent lack of an alternative liquefied petroleum gas (LPG) feedstock, at an affordable price, has also prompted buyers to rely mostly on naphtha.
“Demand for LPG has been good in India and parts of Southeast Asia," an industry source said, adding that slashing of oil supplies by OPEC have also led to reduced LPG supply. LPG is predominantly used as a cooking fuel in India and Indonesia, and as a heating fuel during winter months in the West.
But the strength in naphtha crack has failed to lift gasoline refining margins, where its discounts to Brent crude widened to $1.55 a barrel versus a discount of $1.35 in the previous session.
Gasoline supplies remain in excess with exports from China in April hitting a record high of 1.9 million tonnes, official data showed.
Although China's May gasoline exports are expected to dip to multi-month low, its June export volumes could rebound.
China is reviving a $20-billion petrochemical project in eastern Shandong province as part of efforts to dial up infrastructure spending to support an economy struggling with the impact of the COVID-19 pandemic, two China-based industry sources said.
The 400,000 barrel-per-day (bpd) refinery and 3 million tonne-per-year ethylene plant in Yantai, Shandong, was proposed years ago but approval has been slowing in coming because of China's struggle with excess refining capacity.