U.S. naphtha exports surge to record high on Japanese, Venezuelan buying
U.S. exports of naphtha rose to a record as Japan rushed to secure alternatives after the Iran crisis cut off Middle East supplies of the petrochemical feedstock, and as Venezuela stepped up purchases to dilute its heavy oil.
The record levels of naphtha exports signal the upheaval in the energy market this year and the redrawing of trade lines that have come with it. Asian petrochemical companies are looking much farther west to secure supplies or will have to shut in production, while exports to Venezuela, which were allowed only under limited authorizations, have now soared to the top spot.
Exports of naphtha from the United States climbed to a record 493,000 barrels per day (bpd), according to ship tracking firm Kpler. About 130,000 bpd headed to Asia, the highest in over four years.
Shipments to Japan climbed to 71,000 bpd, the most since December 2021, data showed. Exports to South Korea totaled about 50,000 bpd, the highest this year.
The rush by Asian petrochemical firms to source naphtha has sent prices surging. The Middle East Gulf supplies 60% of Asia's naphtha imports, or about 35 million barrels per month. South Korea has also turned to Russian naphtha supplies, the first such cargoes since an import halt in late 2022 prompted by Moscow's invasion of Ukraine.
"Imports from the West would still be the main support mechanism to replace the lost barrels," said analyst Jorge Molinero at research firm Sparta, adding that freight rates from the West to East were rising daily.
A fixture for a naphtha cargo on a medium-sized tanker from the U.S. Gulf Coast to Japan was reported at $9.6 million on Friday, double the freight level seen before the conflict began, Molinero said.
Naphtha is used to produce petrochemicals such as ethylene used to make goods ranging from plastics to textiles, paint, medicine and construction materials.
About 5% of global ethylene capacity had been shut in Japan, South Korea and China due to a lack of feedstock, JPMorgan analysts said in a note last week.
Venezuelan imports rise. About 140,000 bpd of naphtha also headed to Venezuela, the highest on record, as naphtha is used to dilute the South American country's heavy crude output.
Naphtha exports to Venezuela have surged after a trade deal was struck in January by Caracas and Washington to sell up to 50 million barrels of Venezuelan oil in storage, and included the supply of much-needed naphtha.
Higher Venezuelan oil production and exports have increased the need for naphtha in Venezuela, said Matt Smith, an analyst at Kpler.
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