Russia naphtha exports to Asia fall to 1-yr low, support margins
Russian naphtha flows to Asia plummeted to a 1-yr low in February following fresh drone attacks on Russian refining infrastructure, boosting prices for the plastic raw material in the east, traders and analysts said.
Naphtha is a feedstock for producing petrochemicals for making electric vehicle parts, plastic bottles and consumer goods. Asian refiners' profits on making naphtha from a crude barrel are up by about 40% since Washington announced harsher sanctions on entities involved in the Russian oil trade.
The risk to Russian supplies could further complicate an already intricate global naphtha trade, industry sources said. Since Europe banned Moscow’s oil product imports in 2022 over the Ukraine war, Russia has shifted most of its naphtha exports to Asia.
Russian naphtha exports to Asia have plummeted to a 1-yr low in February to 480,000 t–580,000 t, preliminary ship-tracking data from LSEG and Kpler showed, a trend likely to continue up until May or June when supply improves after Russian refiners return from seasonal maintenances.
Companies in China, India, Taiwan, Singapore and Malaysia are the main buyers of Russian naphtha, the data showed.
"The decline in exports is likely attributable to the increased Ukraine drone attacks on Russian refineries in late January and February," FGE analyst Yew Jing Seah said.
Refineries hit by the attacks include the 340,000-bpd Volgograd plant, the 378,000-bpd Ryazan refinery and the 134,000-bpd Ilsky refinery.
Russia-based traders said some cargoes from January were moved to February loadings amid stormy weather in Black Sea ports, contributing to reduced exports. They added that the impact of Trump's latest sanctions could translate into some delays for March loadings.
In the last two years, Red Sea and Strait of Hormuz tensions have forced many shipments moving via east of Suez to reroute around Africa, increasing costs and eroding the discount on Russian naphtha.
Asia's naphtha margins have also firmed due to fears of Iranian condensate supply disruption over Trump's sanctions, said a Singapore-based naphtha trader. Condensate is an ultra-light oil typically processed at splitters to produce naphtha.
The refining profit margin for naphtha rose to about $120 per metric ton over Brent crude by Thursday, compared with $85.60 on Jan. 10, prior to the sanctions announcement.
An India-based petrochemical trader said the current strength in naphtha margins is due to supply risks from Russia, although Asia's demand remains subdued because of maintenance at some crackers in India and South Korea.
Taking advantage of the naphtha supply shortfall, exporters in Africa and the Middle East are likely to step up east-bound shipments, analysts said. The share of Algerian naphtha arriving in Asia has already increased to about 28%, or 282,000 tons, this month, compared with roughly 19% in January, according to Kpler data.
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