India Dec naphtha exports dip to lowest in months

SINGAPORE, Nov 30 (Reuters) India's naphtha exports are set to fall to around 350,000 tonnes next month, their lowest in months, amid a pick-up in domestic demand for power generation, traders said on Thursday.

Spot and term tender sales suggest exports will come in far lower than this year's monthly average of 500,000-600,000 tonnes, a factor that has depressed naphtha values, although some sources said the drop appeared temporary.

''There seem to be some domestic naphtha consumption for power generation,'' a trader in a Japanese trading house said.

The ICE Brent/naphtha crack -- naphtha's premium against Brent crude -- was assessed at a tonne on Tuesday for front-month first-half January, up from a low of around two months earlier but off a June high of 0.

Sellers are reluctant to make offers in a rising market, as they await further direction from the results of a spot export tender by Indian Oil Corp. (IOC), due on Wednesday.

The Indian refiner is also seeking to import a maximum of 240,000 tonnes of naphtha for December 2006 to March 2007 arrival to supply Dabhol power plant via a tender that closed on Monday. Its result was not yet known.

India's naphtha exports have been rising steadily in the past two years as domestic demand has fallen since the country began importing liquefied natural gas in 2004 and as power stations as well as fertiliser plants increasingly use the cheaper gas.

The country's monthly naphtha exports by spot tenders then hit a record-high of more than 700,000 tonnes for August on higher production and as domestic users switched to gas, pushing the naphtha spread versus crude down sharply.

But as new LNG cargoes are secured and additional capacity is built, some analysts expect naphtha exports will quickly return to their previous robust levels.

''It is demand related and not expected to be a long-term development,'' Jim Weinrauch, analyst at Naphtha Information Services, said, referring to India's declining naphtha exports.

Naphtha is the feedstock used to produce ethylene and propylene, the basic building blocks for the chemical sector.

REUTERS CS PM1446