Overview
The naphtha swaps market has been relatively sideways when looking at the cracks, but the strength in Asia has continued to outpace its European counterpart. We are starting to see some better selling at these very strong levels. South Korea is launching its biggest petrochemicals overhaul in decades as Lotte Chemical and HD Hyundai Chemical merge their naphtha cracking operations at the Daesan Industrial Complex to counter heavy losses from a China-driven market glut. In Singapore, PCS plans to cut throughput by about 10%, ExxonMobil may reduce to around 60%, and Aster Chemicals and Energy is shutting its cracker. Similar rate reductions are happening in Northeast Asia, further lowering naphtha demand. Moreover, there may be lower naphtha demand from petchem players due to weak aromatic margins. This, along with the strong propane demand in the East, explains our trade idea this week.
There has been greater selling pressure in the NWE and MOPJ cracks from trade houses and refiners mostly, as there has been a significant increase in both regions’ open interest.
The Jan’26 NWE gasnaph (EBOB – NWE Naphtha) saw good strength this week, rising from $111.46/mt on 24 Nov to $121.86/mt on 01 Dec (time of writing). Open interest remained relatively flat, with levels well below the 5-year high. Net positioning against Onyx has fallen this week, driven by trade houses and refiners trimming shorts. While bullish momentum has been waning in this contract, the M1 gasnaph continues to search for firm directional conviction.
The M1 C3 FEI/MOPJ rose from -$57.44/mt on 24 Nov to -$40.24 on 01 Dec (time of writing). Open interest and net positioning against Onyx both saw a net increase this week, as trade houses and majors added to longs. From a technical perspective, momentum in this contract has begun to show signs of a correction, with a bearish crossover seen in the short-term stochastic oscillator.
