ICE front-month CFR Japan naphtha swap open interest rises 19% in Nov

Open interest for front-month December CFR Japan naphtha swap contracts on the Intercontinental Exchange rose 18.73% on the month to 2.40 million mt in November, latest ICE data showed Dec. 4.

The open interest for December 2023-December 2024 CFR Japan naphtha swap contracts also increased, rising 30.38% on the month to 8.81 million mt, while the total intermonth spread volume jumped 57.12% over the same period to 1,117 trades, the ICE data reflected.

A tight upstream supply complex for H2 December and H1 January delivery cargoes due to weather delays and Middle East refinery turnarounds has lifted the Asian naphtha market, said sources.

Reflecting market strength, the November CFR Japan naphtha physical crack against front-month ICE Brent crude futures has shown steady improvement from October, when it fell into the negative territory due to depressed Asian naphtha prices. The crack averaged $29.5/mt in November, steeply higher from the October average of minus $3.71/mt, S&P Global Commodity Insights data showed.

The physical crack has since rallied to a near eight-month high of $66.375/mt at the Dec. 4 Asian close, up $4.30/mt on the day, on rising naphtha prices against a weakening crude complex, S&P Global data showed. The crack was last higher on March 30 at $71.45/mt, the data showed.

Due to the supply tightness, the backwardation structure of C+F Japan naphtha physical assessments for line 1 to 3 half-month cycles widened from minus $2/mt to plus $10.25/mt over Nov. 1-30, S&P Global data showed. The backwardation structure continued to widen in early-December, with current front cycles H2 January/H2 February assessed at $14.50/mt at the Dec. 4 Asian close, up $4/mt from the previous session. The line 1 to 3 spread was last wider on March 22 at $16/mt.

However, levels are expected to retreat for the current H2 January delivery cycle, as supply tightness eases and downstream margins are yet to recover above the breakeven levels, said sources.

Narrow olefins margins continued to hurt downstream demand, as the Platts-assessed CFR Northeast Asia ethylene price spread to C+F Japan naphtha remained below breakeven levels. The spread was at $209/mt at the Asian close Dec. 4, wider by $15.50/mt on the day due to slightly weakened naphtha prices. The spread, however, was still below the typical breakeven levels of $250/mt for integrated producers and $300-$350/mt for non-integrated producers, S&P Global data showed.

Open interest for ICE CFR Japan naphtha futures:

Open interest for Dec 23-Dec 24 ICE CFR Japan naphtha futures:

Spread volume for ICE CFR Japan naphtha futures:

Source: Intercontinental Exchange

Note: Open interest for a month is measured at the end of the previous month