Australia’s Jan NWS condensate seen stable-to-slightly stronger, upside remains capped

Australia's North West Shelf condensate cargoes scheduled for January loading were valued stable to slightly higher, though the upside would likely be limited as the complex continues to be impeded by sluggish downstream petrochemicals margins, sources said.

The January-loading program had emerged, with two 650,000-barrel cargoes of NWS condensates being scheduled, down one on the month, trade sources said.

Oil major BP holds the first cargo for loading over Jan. 13-17, while Australia's Woodside Energy holds the second cargo for loading over Jan. 27-31.

Valuations for January-loading NWS were heard at a discount in the $4s/b to $5s/b to Platts Dated Brent crude assessments, FOB, which remains stronger than December-loading barrels, which had traded at discounts in the $5s/b against the same benchmark.

A regional trader alluded to the possible support to the re-emergence of Indonesia's Pertamina for the January-loading trading cycle, which had not sought any condensate barrels in the previous trading cycle.

"Sellers are usually bullish at the beginning of the cycle ... especially with TPPI attempting to buy," the trader said, adding that "TPPI may be able to pay more."

Eyes are on Pertamina's crude and condensate tender for January arrival, which closes Nov. 13 and is valid until Nov. 15.

However, sources reiterated that any potential upside would likely remain capped due to persistent sluggish downstream margins and recent easing of naphtha cracks.

"We had a more bearish forward view for December/January Naphtha cracks for a while, which is starting to show," a trader emphasized, alluding to "margins and dampened demand due to Chinese delaying cracker start-up like Wanhua."

The naphtha complex saw cracks tapering off, as the CFR Japan naphtha physical crack spread against front-month ICE Brent crude futures averaged $103.71/mt as of Nov. 12 Asian close, narrowing $5.67/mt or 5.18% from an average of $109.37/mt in October, S&P Global Commodity Insights data showed.

Markets are also on the lookout for the forthcoming QatarEnergy spot and term tender results for its low sulfur condensate for fresh cues. Both tenders close on Nov. 13, with next-day validity.

In the previous cycle, the company had sold a 500,000-barrel cargo of low sulfur condensate to a trading house at a premium in the low-$1s/b to the Platts front-month Dubai crude assessments, FOB, Commodity Insights reported earlier, citing market sources.

Naphtha costs comparatively lower

Market sources said lower prices of heavy full-range naphtha compared to the cash differentials for NWS condensate may result in the former being preferred as a splitter feedstock.

An end user said, "Condensate is still expensive." However, he added that naphtha cracks are still relatively high, making it difficult to profit from either feedstock.

In the most recent spot tender concluded for heavy full-range naphtha, South Korea's GS Caltex bought at least 25,000 mt of grade A, B and C heavy full-range naphtha for H2 December delivery to Yeosu at a premium of around $7-$13/mt to Mean of Platts Japan naphtha assessments, CFR, pricing 30 days prior to delivery

For H1 December delivery, Hanwha Total previously bought at least one 25,000-mt cargo of grade C heavy full-range naphtha for H1 December delivery to Daesan at a premium of about $6-$7/mt to Mean of Platts Japan naphtha assessments, CFR, pricing over H1 November prior to delivery.

Market participants felt the heavy full-range market was weak, largely due to weak aromatics margins. The PX market was also pressured by ample supply and sluggish demand.

Platts assessed the spread between CFR Taiwan/China paraxylene and CFR Japan naphtha physical averaged $171.53/mt as of Nov. 12 Asian close, narrowing $27.58/mt from an average of $199.11/mt in October, far below the typical breakeven level of around $280-$300/mt.

Meanwhile, Indonesia's Pertamina has issued a tender seeking 44,000 mt of naphtha as a splitter feedstock for Jan. 19-21 delivery to TPPI Tuban. The tender closes Nov. 14, with validity until Nov. 18.

Looking forward, analysts from S&P Commodity Insights said in a report that "Integrated splitter margins will stay subdued through Q1 2025 on weak petrochemicals and middle distillates outlook."