Adnoc to skip Q2 naphtha export in Apr-March talks

Abu Dhabi National Oil Co (ADNOC) will skip term naphtha exports in the second quarter under its April 2010-March 2011 contract, due to a lack of supplies, traders said on Thursday.

This, as well as concerns over prices for the April-June 2010 quarter, has prompted its Asian buyers to weigh whether or not to renew their contracts in negotiations that started at the weekend, traders added.

There was talk that one buyer had decided to agree to the terms and prices at $23.50-$25.50 a tonne premium to ADNOC's price formula on a free-on-board (FOB) basis, although this could not be confirmed with the buyer concerned.

"ADNOC said they will defer the April cargoes to July onwards, but that would mean we have to look for spot cargoes in the interim," said a term lifter.

"They may give us more volumes than expected from July, but that is not really the point."

April spot supplies are tight while demand is exceptionally strong compared to March.

This is because crackers in Japan and South Korea that will undergo scheduled maintenance in March will have resumed operations in April.

Additionally, Western barrels have not been arriving, due to equally strong demand in Europe.

Although cracks weakened to a four-session low at $154.03 a tonne premium, after hitting a six-week high on Wednesday at $164.03 a tonne, current values still reflect a strong market.

The immediate reasons behind the lack of cargoes were not clear but traders said it could be due to overcommitment in other term contracts, as ADNOC also holds two other 12-month contracts with buyers for January-December and July-June.

ADNOC on Sunday announced offers for its three naphtha grades for April 2010-March 2011.

Splitter naphtha was offered at $23.50 a tonne premium, low-sulphur grade at $24.50 a tonne premium, and pentane plus at $25.50 a tonne premium.

Buyers, which include firms from Taiwan, Japan, South Korea and Malaysia, were supposed to reply by March 3.

"Their exports in the future will certainly increase," said a trader.

This was because ADNOC will get additional condensates from new gas supplies to feed into their condensate splitters, although the new supplies have been repeatedly delayed.