Bloomberg News

Asia Naphtha Crack Spread Poised for Weekly Drop: Oil Products

October 28, 2011

Oct. 28 (Bloomberg) -- Asia naphtha’s crack spread is poised to narrow this week by the most since January 2009, signaling declining profit for refiners making the petrochemical feedstock. Gasoil swaps may extend a weekly rally.

Light Distillates

Japan’s open-specification naphtha forward contracts for first-half December delivery were bid at $876.50 a metric ton against offers at $879.50 at 12:45 p.m. Singapore time, according to data from Ginga Petroleum Singapore Pte, a broker. Prices rose yesterday for the first time in five days to close at $869.50.

Naphtha’s premium to London-traded Brent crude futures gained $3.62 to $28.71 a ton, based on data compiled by Bloomberg. This crack spread, a measure of refining profit, is set for a 51 percent drop this week, the most since January 2009.

Gasoline’s premium to naphtha yesterday jumped to $29 a barrel, matching a 30-month high reached on May 6, Bloomberg data showed. A widening reforming margin means it is more profitable to produce motor fuel.

Middle Distillates

Gasoil, or diesel, swaps for November climbed 5 cents to $125.65 a barrel, according to PVM Oil Associates Ltd., a broker. Prices are headed for a third weekly advance, the longest rising streak since June.

Gasoil’s premium to Asian marker Dubai crude fell 73 cents to $18.04 a barrel, PVM data showed. This crack spread has widened 0.4 percent from last week and is poised for a second weekly gain. Jet fuel’s premium to gasoil was unchanged after decreasing to $1.75. This regrade is the lowest this month, indicating it is less profitable to make aviation fuel over diesel.

Fuel Oil

Fuel oil’s discount to Dubai crude widened 9 cents to $3.53 a barrel, according to PVM. The difference is set to increase for the third week in four, signaling refiners’ losses from turning oil into residual products are growing.

November high-sulfur fuel oil swaps added $5, or 0.7 percent, to $676.50 a ton, PVM said. Prices are up 2.5 percent from last week. The premium of 180-centistoke fuel oil to 380- centistoke grade, or the viscosity spread, was unchanged for a second day at $7.75. The gap has widened 19 percent this week, the most in eight weeks, showing bunker, or marine fuel, has risen less than higher-quality fuel oil.

--Editors: Mike Anderson, Paul Gordon.

To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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