Asia Oil Market Overview: Naphtha Crack Spread Rises 60% Weekly, Diesel Spot Premium Hits New High

(1) This week, the Asian naphtha market underwent a dramatic revaluation, with cracking spreads surging by about 60% due to production halts or reductions at multiple facilities caused by the Gulf conflict, directly impacting the supply side. On Friday, the naphtha-Brent crude cracking spread remained near a four-year high at $177.18 per ton, widening further from the previous day's $175.83 per ton. (2) The tightness in the spot market is even more pronounced in the term structure. The price spread between naphtha cargoes loading in late April and late May widened by about $8 to $50 per ton, indicating an extreme scarcity of prompt supply. Two sources revealed that Singapore's Asiatech Energy's steam cracker is currently operating at only 50% capacity, having just restarted at the end of February, exemplifying the wave of production cuts. (3) The diesel market is also experiencing wild price action. The 10ppm diesel spot premium soared to a record high of $23.88 per barrel, and although the cracking spread edged down slightly to just below $40 per barrel, it is still nearly double that of a week ago. Traders pointed out that spot trading for April has basically stalled, as refineries are considering adjusting next month's operating rates amid expectations of tight crude supply. (4) Fuel oil spot premiums have surged to their highest levels since 2022. Some traders admit that, due to the Iran war hindering key Middle Eastern suppliers from shipping through the Strait of Hormuz, finding alternative supplies is becoming extremely difficult. Although Singapore inventories are still ample for now, the market expects tightening later this month, pushing prices even higher. The April fuel oil cracking spread has more than tripled from last week, and the April 380-cst high-sulfur fuel oil-Brent crude cracking spread has already broken above $10 per barrel.