Japan has become the prime destination for naphtha originating from the US Gulf Coast and Latin America, as the value of delivered naphtha in the Asian country was at a wide premium to FOB naphtha in the Americas region, according to industry sources and Platts data.
Two vessels carrying naphtha from the US Gulf Coast to Japan have been fixed this week, according to shipping industry sources. Valero has fixed the 38,000 mt MR Sirius vessel to Japan at a lump sum freight cost of $1.4 million, while Shell has fixed the 60,000 mt Elegant Victoria vessel at a lump sum of $1.6 million.
In addition, Repsol has fixed the 38,000 mt Oktha Bridge vessel from Peru with Japan as a destination at a $1.35 million lump sum rate, shipping sources said.
"The naphtha arbitrage to the Far East is working," a shipping source said. "There are lots of ships going on subs for USG/Japan-Singapore. Every trader is looking for tonnage to move naphtha barrels east."
Peruvian virgin naphtha has recently traded at a 15 cents/gal discount to US Gulf 87 unleaded waterborne gasoline, which reflects a $2.42/gal outright FOB naphtha assessment and a 11-cents/gal discount to Japan's first half of December naphtha assessment. Given the 9.76 cents/gal freight rate, that arbitrage was open by 1.24 cents/gal, according to Platts data.
Petroleum Association of Japan data released this week showed refineries have slashed production by 5.2% to a three-week low of 2.27 million barrels for the period of October 14-20. This dip pulled naphtha inventory levels lower as well, with stocks currently standing at 10.25 million barrels, down 2.1% from a week ago.
Meantime, Peru has awarded a tender to sell 200,000 barrels of virgin naphtha. The volumes were sold to Chevron for a 15 cents/gal discount to a three-day average of Platts assessments of US Gulf Coast waterborne unleaded 87 gasoline for the day before, day of and day after the bill-of-lading date, on an FOB basis. The volumes are scheduled to load November 11-15 at Peru's Talara port.
In addition, a vessel leaving from the Peruvian port of Pisco was said to be carrying 300,000 barrels of natural gasoline to Japan. Pisco natural gasoline has recently sold at a 40 cents/gal premium to Mt. Belvieu non-Targa natural gasoline, on an FOB Pisco basis. The cargo was sold to Shell, sources said.
With Mt. Belvieu natural gasoline assessed Wednesday at $2.065/gal and freight rates ranging between 7.32-10.12 cents/gal, Japan was still the most profitable market for traders given the $2.52/gal assessment for a delivered cargo into Japan during the first half of December, a difference of at least 35 cents/gal.