SINGAPORE: Kuwait Petroleum Corp (KPC) has for the first time cut its term naphtha offer to $13 a tonne premium, despite sealing a deal with one buyer at a higher price which would have been normally agreed by others, traders said yesterday. The latest offer has been accepted by three buyers, but their identities were not known, trade sources said.

“KPC’s full-range naphtha is especially popular with some petrochemical makers,” one trader said. The sources said that despite the latest acceptance, more termination of the contract may have also taken place after the revision, but this could not be immediately verified. Japanese trading houses Marubeni and Petro-Diamond December-November contracts were terminated recently when the talks were ongoing, traders said.

KPC’s latest $1 reduction from the premium agreed with Taiwan’s CPC this week, could have been prompted by strong resistance from customers including South Korea’s Hanwha and YNCC, Japan’s Mitsui Chemical and Maruzen as well as India’s Haldia Petrochemicals, traders said. This unprecedented move could affect rival Abu Dhabi National Oil Co’s (ADNOC) ongoing term talks, as it usually takes its cue from KPC, Asia’s second-largest naphtha supplier after Saudi Arabia.

“This is the first time KPC had made such a move. In the past, once a buyer accepts a price, that’s final and there will be no room for negotiation,” said a trader.

The latest cut for KPC’s December 2009-November 2010 naphtha supplies is the fourth since talks began on October 12. It kicked off the offer at $19 a tonne premium to Middle East quotes, on a free-on-board (FOB) basis, and the latest came a day after CPC accepted its offer at a $14-premium. “But this time round, the resistance was rather strong, with highest bids capped at $12.00 a tonne premium,” a second trader said. It remains to be seen if the acceptance by the three buyers at the $13-premium will also prompt others to agree.

Despite having concluded its deal with CPC, traders said KPC will likely lower the term price to match the revised level. “From my understanding, KPC will likely give CPC whatever the final price is,” the second trader added.

Although naphtha sentiment is firmer now than a month ago, traders said buyers are cautious, as they would be locked into a 12-month deal at a time of uncertain demand and supply dynamics. Crack spreads - premiums/losses from refining Brent crude into naphtha - was at $95.95 a tonne premium yesterday versus an $80.10 premium a month ago, helped by Korean crackers running at full-tilt and robust Chinese petrochemicals demand.

But traders also noted that KPC has been selling more spot cargoes lately and at slight premiums. Going forward, China will have more new crackers, which would lower its petrochemicals imports.