Australia's June-loading NWS condensate pressured by weak cracks, economic uncertainty

The cash differential for Australia's North West Shelf condensate is expected to weaken during the June loading trade cycle, due to declining naphtha cracks and concerns over a global economic slowdown amid tariff uncertainties, according to sources.

The June trading cycle saw two 650,000-barrel cargoes of NWS condensate scheduled, up from one the previous month, trade sources said.

Australia's Woodside Energy holds the first cargo for June 5-9 loading, while Japan's Mitsubishi holds the second cargo for June 21-25 loading. The grade was heard valued at discounts of around $2-$6s/b against Platts Dated Brent crude assessments, FOB.

In the previous trading cycle, China's CNOOC held the sole cargo for May 6-10 loading, which was heard sold to Unipec at around a small premium to the same benchmark.

Bearish sentiment was heard to have rippled through the condensate complex amid bleak macroeconomic conditions and concerns over a global economic slowdown, which have dampened both naphtha and downstream petrochemical demand.

"End-users are very cautious to buy now because of all the headline uncertainties and worsening margins," a trader said.

This follows an escalation in US-China trade tensions after US President Donald Trump announced on April 9 a 90-day tariff pause for countries that had not retaliated against the US. Subsequently, on April 10, the White House clarified that the US would impose a 145% cumulative tariff on Chinese imports in response to China's announcement of an 84% tariff on US goods while reducing tariffs for all other nations to 10%.

"If we talk [about] recession, petrochemicals is over, [and] naphtha has a long way to go down," another trader said.

The situation was further exacerbated by several heavy splitters undergoing turnarounds and some South Korean end-users considering cuts to their run rates due to weakening naphtha cracks and demand.

Platts, part of S&P Global Commodity Insights, assessed the second-month naphtha swap crack against Dubai crude swaps at an average of minus $7.15/b so far in April, compared with an average of minus $4.74/b in March.

However, some trade sources said a price floor still exists for condensate, as some refiners may be interested in procuring it as a more affordable alternative.

"[Condensate] is a niche market ... Some buyers can value NWS better than others," a trade source said.

This comes as the June-loading cycle saw the return of Indonesia's Trans-Pacific Petrochemical Indotama refinery following maintenance at its splitter unit in Tuban in mid-May.

All eyes are on the tender results from Indonesia's Pertamina -- a key NWS buyer -- which closed April 9 and is valid until April 11, as the refiner sought various crude and condensate grades for June delivery.

The market is also closely monitoring QatarEnergy's monthly spot offering of low sulfur condensate for June loading via a tender closing April 15 with next-day validity.

In the previous trading cycle, QatarEnergy canceled its LSC tender for May loading, with market sources attributing the decision to an unexpected production shortfall caused by unstable output following a turnaround.

The refiner previously sold one 500,000-barrel cargo of LSC for April loading to ENOC at a premium in the low $1s/b to Platts front-month Dubai crude assessments, FOB, and two 500,000-barrel cargoes of deodorized field condensate for April loading to ATC and ENOC at premiums of around $1.25-$1.60/b against the same benchmark.

Asian naphtha gains on Chinese demand hopes

The Asian naphtha market saw signs of recovery after earlier declines, with the demand outlook improving as market participants assess the impact of tariffs on petrochemical feedstocks like naphtha.

Chinese demand for naphtha could rise as China's retaliatory tariffs on the US may disrupt its supply of US-origin ethane. This could prompt Chinese players to switch to alternative feedstocks, such as naphtha, according to sources.

China's cracker and propane dehydrogenation unit operations are being closely monitored, given the country's imports of propane and ethane from the US, a Northeast Asian buyer said.

Reflecting this renewed strength, the Platts-assessed CFR Japan naphtha premium stood at $9/mt on April 10, rising $2/mt day over day but falling $3/mt week over week.

However, market sources remain cautious about downstream demand for naphtha, as finished goods could be affected by broader macroeconomic concerns.

Naphtha-fed steam crackers are considering cutting operating rates due to high downstream inventories, an Asian source said.

The Platts-assessed spread between CFR Northeast Asia ethylene and CFR Japan naphtha physical averaged $260.36/mt so far in April, compared with March's average of $231.50/mt. This was slightly above the typical breakeven spread of $250/mt for integrated producers.

The Platts-assessed spread between CFR Taiwan/China paraxylene and CFR Japan naphtha physical averaged $203.73/mt so far in April, compared with March's average of $203.82/mt. This was below the typical breakeven level of around $280-$300/mt.

In the latest spot tender, South Korea's GS Caltex purchased five 25,000-mt cargoes of heavy full-range naphtha -- grades C to A -- for second-half May delivery to Yeosu, at premiums of around $5-$9/mt to Mean of Platts Japan naphtha assessments, CFR, pricing 30 days prior to delivery.