FEATURE: Naphtha cargoes set to sail from USGC hit 800,000 mt so far in September

Houston — Naphtha cargoes set to sail from the US Gulf Coast so far in September registered 800,000 mt as regional market players were eager to get barrels of light naphtha off their hands, with a focus on feeding Asia's appetite for light paraffinic barrels.

Light straight run naphtha barges hit their lowest level since late June earlier in September amid a saturated market. In the first ten trading days of September, the LSR naphtha barge price averaged 87.8 cents/gal.

S&P Global Platts on Sept. 17 assessed LSR naphtha barges at September natural gasoline, C5, at the Enterprise facility, plus 5 cents/gal, for an outright price of 95 cents/gal.

Despite weaker crude prices, the Asian naphtha complex has been supported amid tight supply of light paraffinic naphtha as less cargoes flowed from the Middle East to North Asia and European cargoes were not satisfying Asia's appetite.

Market sources said there have also been specification issues around sulfur, arsenic and carbon disulfide with European cargoes.

"It seems there are alot of spec issues lately, maybe change of crude or lesser blending of crude due to lower demand," a market source in Asia said.

Platts fixture logs showed 534,000 mt of cargo fixed or placed on subjects since the week of Sept. 7, with optional discharge in the Far East, including Japan or South Korea. Market players were heard to be seeking ships to make the voyage to the East for an additional 152,000 mt of cargo, sources said.

Five Long Range 1 tankers and three Medium Range tankers were booked by various charterers, taking advantage of the briefly open naphtha arbitrage from the US to Asia and the US to Europe.

Early in the week of Sept. 7, three LR1s were reported on subjects to unknown charterers. Market participants heard that two of the ships had naphtha cargoes with the intention for discharge in Asia and the third had a naphtha cargo with the intention for discharge in Brazil.

The morning of Sept. 14, market participants reported the fourth LR1, the BW Orinoco, on subjects to an unknown charterer on a naphtha run to Asia at a rate of lump sum $1.7 million, or $28.33/mt basis 60,000 mt.

An LR1 owner said Sept. 14 that it was likely that more than four LR1s were placed on subjects with naphtha cargoes, however, details on these private cargoes could not be confirmed. A shipbroker heard a multitude of charterers, including Vitol, Trafigura, Valero and ST Shipping, all making inquiries about LR1s or MRs with naphtha cargoes.

Despite long MR tonnage in the US Gulf Coast region for most of September weakening freight, MR owners showed resistance to offering on Asia-bound cargoes in an effort to not position themselves outside of the USGC before the seasonally-stronger fourth quarter. Additionally, MR freight has been low in Asia, making for an unappealing destination for owners.

Due to owners' reluctance to reposition their MRs in Asia, freight increased on the 38,000 mt run, last traded at lump sum $1.5 million or $39.47/mt late Sept. 11.

Shipowners said inquiry for USGC-Far East runs had died off as of early afternoon Sept. 14, likely due to the uptick in price on the MR segment. Cargoes from the previous week, including those reported from Phillips 66, Lukoil, and others also looking at LR1s, were left uncertain.

With inquiry having died off Sept. 14 at the beginning of the week, market participants were uncertain how rates on the 38,000 mt USGC-Japan/South Korea run would fare going forward. Should freight fall again, the arbitrage opportunity could reopen, but owners still have little interest to voyage East.

"The realist in me sees the front of the [position] list and you could probably find a weak link in the MR space to push that down a bit," a second shipowner said Sept. 16. "But we still have what we talked about last week, that the East is weak and it's so hard to get an MR owner excited to head that way."

Platts assessed the 38,000 mt USGC-Japan/South Korea route at $1.45 million on Sept. 17, a 16% increase week on week. The 60,000 mt USGC-Japan/South Korea run was assessed at $1.7 million, a 12% decrease week on week.