Global naphtha supply is seen to tighten until 2021 as an aftermath of the COVID-19 pandemic which depresses fuel demand and refinery outputs, analysts said. Refineries produce 75% of global naphtha, which accounts for 40% of feedstocks used to produce ethylene. However, refineries operate based on demand for other refined products, not naphtha.
The pandemic has destroyed demand for other refined products, mainly transportation fuel such as gasoline. As a result, refiners cut their throughput by 15-16% in April. Some of them have continued to keep their plants shut and extend planned maintenance works. Lower gasoline blending had affected global light naphtha production, the analysts said.
According to them, the shortfall in light naphtha supply will peak in the fourth quarter of 2020. Robust petrochemical demand during the post-pandemic recovery is expected to cause supply to tighten further. To ease the tightness, refiners can re-blend excess heavy naphtha into light naphtha, the noted.
