The naphtha complex rebalanced amid mass stop-outs and heavy selling into the cracks, which saw huge pressure in both regions. Stronger crude pressured the cracks alongside weaker demand estimates in the East and clear refiner selling in MOPJ flat price which spooked the market. The East retained strength slightly more as the E/W saw a huge rally in January. The physical market in Europe has been very weak, but both regions seem to have reached a bottom. Keep an eye out for better support here for something for bulls to bite on to.
The Feb’25 NWE naphtha crack dropped significantly from -$2.65/bbl on January 3 to a low of -$6.65/bbl on January 13, recovering slightly to -$5.85/bbl on 14 Jan. Open interest peaked at 18.3mb on 8 Jan, accompanied by a rise in net positioning to 2.4mb, before falling by 1.2mb from January 8-10.
Trade houses shifted from buyers to sellers, but remain 1.4mb long with Onyx. Prop traders and majors added length, with prop traders now net long.
The prompt naphtha East/West (MOPJ vs NWE naphtha) rose from $18.25/mt on 7 Jan to $23.25/mt on 13 Jan, peaking intraday at $26.00/mt but closing lower, forming an inverted hammer candlestick. Trade houses reduced their long positions with Onyx to 738kb on January 10, buying 100kb the next day despite stronger prices. Majors sold to Onyx, with a net short position of 285kb.
Open interest (OI) in the naphtha complex reveals that market participants are deploying significantly higher amounts of risk relative to historical levels. Only OI in the M1 MOPJ crack is lower than its value 2 weeks ago. The OI in the crack is 15% higher than the previous highest value recorded. Interest in the summer tenors is extremely strong, with players positioning pre-potential tariffs between the US and China, in particular.
The TC5 freight (from the Middle East to Asia) has seen great strength in the past two weeks, with the M1 increasing by over 26% in the 2 weeks to 13 Jan, especially supported by the added sanctions on Russia. This has supported dirty freight rates extremely well but has also lifted the TC5 route in particular.
Hassan Abbaszadeh, head of the National Petrochemical Company (NPC), outlined plans to boost production capacity to 131.5 million mt by 2028, focusing on value-added production and sustainability. The industry is advancing 61 projects under the seventh development plan, with half of the $24 billion investment already spent. Efforts include securing feedstock, expanding exports, and promoting renewable energy and energy efficiency.
Nayara Energy, supported by Rosneft, is planning to invest ₹68,000 crore ($8 billion) to establish a 1.5 mtpa ethane cracker at its 20 mtpa refinery located in Vadinar, Gujarat, according to sources familiar with the matter.
