* Western cargoes outpace Asian demand for 3rd straight month
* Handful of ships unable to discharge
* High petchem runs keeps full-blown glut impact at bay
By Seng Li Peng
SINGAPORE, Oct 20 (Reuters) - Asia is set to import about 1.6 million tonnes of naphtha from the West in November, traders said on Monday, exacerbating a glut of the fuel that has already pummeled its prices in the region.
The projected naphtha shipments to Asia from Europe, the United States and the Mediterranean, while lower than the record volume of 2 million tonnes seen in September and the 1.8 million tonnes in October, will still outpace demand by about 200,000 tonnes a month, traders said.
The heavy inflows have already taken their toll on spot naphtha prices, with some deals being done at all-time low rates.
South Korea’s third-largest refiner S-Oil Corp sold two November spot cargoes at a record low $19 to $21 a tonne discount to Japan quotes on a free-on-board (FOB) basis, while India’s Oil and Natural Gas Corp Ltd sold a 35,000-tonne naphtha cargo for Nov. 6-7 loading from Mumbai at minus $3 to Middle East quotes on an FOB basis, the lowest since late 2008.
“Sellers are fighting for buyers. It’s a fire sale out there,” said a trader based in Singapore.
“Cargoes keep streaming east because demand is bad in Europe with Shell’s cracker in the Netherlands being down.”
Shell has unexpectedly shut a cracker in Moerdijk this month, traders said, freeing up some 200,000 tonnes of naphtha a month.
Sellers desperate to get rid of their naphtha have plied Asian buyers with cargoes faster than the latter could run down their stocks, despite operating their petrochemical plants at full throttle.
Typically, sellers have the option of supplying up to 10 percent more or 10 percent less of naphtha contracted with a buyer, a condition which normally does not have any major market impact because Asia has been structurally short of naphtha.
But the unusual glut, a result of high refinery runs and record high volumes of alternative feedstock liquefied petroleum gas (LPG) displacing naphtha this year, is prompting sellers to supply 10 percent more naphtha contracted to a buyer.
As cargoes stack, a handful of ships have been prevented from discharging the cargoes for a few days, traders said.
“In the past, buyers would allow a ship to discharge all of its cargoes at one go even if it had arrived earlier than expected, but this is not allowed anymore,” said a second trader, also based in Singapore.
The full-blown effects of the glut have not been felt completely, said traders. The impact has been mitigated by the high runs at petrochemical plants that soak up naphtha as their feedstock.
Additionally, LPG prices have been rising as winter approaches, making it non-economical to replace naphtha now. LPG is used for heating as well.
“Petrochemical margins are good, so naphtha crackers are running high. But the petrochemical makers are worried that this will not last,” said the first trader. (Editing by Muralikumar Anantharaman)