The price outlook for December-loading North West Shelf condensate hinges on demand from China following the country's return from its week-long National Day holidays, market sources told S&P Global Commodity Insights Oct. 12.
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Register NowAustralia's flagship North West Shelf condensate cargoes, with a typically API gravity of 63 and 0.003% sulfur content, were seen moving to China in recent months, indicating an uptick in Chinese appetite for this regional condensate.
It remains to be seen, however, whether China's demand for the condensate could be sustained going forward, traders said.
"The outlook is challenging; China bought a lot of condensates because of the cheap cargoes, we need to wait and watch to see how they buy this month," an Australia-based crude oil trader said.
In the previous trading cycle, November-loading barrels of NWS condensate were heard to have traded at discounts of $12-$13s/b to Platts Dated Brent assessments, FOB, according to traders.
Platts assessed the differential for North West Shelf condensate at a discount of $12.90/b to Dated Brent, FOB, Oct. 11, down 5 cents/b on the day, S&P Global data showed.
"Market is waiting for Chinese demand to support prices, but supply side [is] quite ample and [light distillate] cracks are weak," a regional crude oil trader said.
It was heard there will be three 650,000-barrel cargoes of NWS condensate available in the December trading cycle, similar to the previous month.
Oil major Shell holds one cargo for Dec. 8-12 loading, while Australia's Woodside Energy holds two cargoes for Dec. 18-22 and Dec. 28-Jan. 1 loading, sources said.
"No supply tightness seen," the Australia-based trader added.
Weak light distillate product cracks amid poor petrochemical margins have continued to weigh on sentiment for the condensate, traders indicated.
Platts second-month gasoline and naphtha swap crack spreads versus Dubai crude swap fell to the month's low of $1.37/b and minus $19.26/b this week, down from a high of $4.02/b and minus $14.58/b, respectively, earlier in the month, S&P Global data showed.
"The value of NWS condensate should be in steep discounts," a Singapore-based condensate trader said. "Have to wait for [December-loading] trades this month to see where the [new price] level is at."
Naphtha competitive for splitters
Heavy full-range naphtha is still a more attractive choice for splitters because it is cheaper than condensate, sources said.
"Naphtha is still negative crack (hence less expensive to produce) so it is cheaper than condensate, there is no question about it," a Southeast Asia-based trader said.
Demand for cracker-feed naphtha has been poor since the second quarter of this year, when the olefin-naphtha spread crashed and weighed heavily on the Asia naphtha complex, sources said.
Reflecting the market weakness, Platts CFR Japan naphtha physical crack against front month ICE Brent crude futures dived $32/mt week on week to minus $32.58/mt on Oct. 10, S&P Global data showed.
"North Asian buyers are quite keen to buy the heavier grades due to the demand for aromatics," the source added.
An indicator of steady demand for heavy full-range naphtha was purchasing activity from South Korea's Hanwha Total, who issued two tenders so far this month seeking heavy full-range naphtha cargoes for second-half November delivery, data tracked by S&P Global showed.