Naphtha Prices Explained
Generally, naphtha prices solely depend on crude oil as its byproduct. However, some determining factors hold naphtha price variations in the market. Reduced demand and plenty of supply drag naphtha prices down to $620 per ton.
Challenges from alternatives such as propane, a proven cost-effective feedstock will further contribute to the decreasing naphtha prices. Furthermore, the predicted milder winter due to global warming will decrease the marketability of naphtha in the market.
Why are naphtha prices fluctuating?
1. Crude Oil Prices
Since naphtha is produced from crude oil, its price reflects the supply, demand, and market value of crude oil.
2. Gasoline Prices
It is a base material for high-grade gasoline production. Thus, an increase or decrease in gasoline demand, supply, and prices directly impacts naphtha market value.
3. Seasonal Demand
As an active ingredient in making gasoline, naphtha prices also cause a distinguishable price hike in summer as demand for gasoline goes high since people tend to go out and drive for travel, vacation, and outdoor activities.
4. Middle East Political Unrest
Political instability, conflicts, and war from one of the top crude oil producers in the world affect its global production, supply, and prices.
5. Increasing Demand from Other Industries
It is one of the key feedstock in making products such as plastics, solvents, rubber, paint, ammonia, methanol, and asphalt production.
Thus, the increasing demand for chemical products such as these from other industries prompts naphtha price fluctuation in the market.
Which variables impact the price of naphtha?
- Crude Oil Prices
- Gasoline Prices
- Seasonal Demand
- Middle East Political Unrest
- Increasing Demand from Other Industries
- Currency Exchange Rates
- Geopolitical Events
Where does naphtha come from?
Naphtha comes from the fractional distillation of crude oil. The process involves heating crude oil in a distillation tower to separate gasoline, butane, and propane. Finally, the end product is a highly flammable liquid hydrocarbon mixture.
Additionally, it can be produced from natural gas known as NGL ( natural gas liquid ) extraction. The processing of natural gas causes NGL’s separation into individual products such as naphtha.
Furthermore, its international trading started in the early 20th century as the petrochemical industry began growing. Thus, it’s an important feedstock for chemicals and fuels such as plastics, synthetic rubber, and gasoline.
Overall, naphtha’s international value heavily relies on the fluctuating demand, supply, and prices of energy sources such as crude oil and natural gas.
Today, this multi-functional product comes from the top producers in the world such as the United States, Saudi Arabia, South Korea, Japan, China, and Russia.
What is the future price of naphtha?
The demand for naphtha is steadily increasing due to the industrial sector’s expansion mainly the automotive industry, major oil corporations, construction, chemical plants, and agri-technology.
While its industry application steadily increases, its production sustainability largely relies on its main ingredient. Additionally, its marketability depends on the availability and prices of other feedstock. Thus, its prices thread according to its production ingredients and alternative substitutes.
While sustainable programs control their massive production for environmental health guidelines, the rising population which is the main price driver of all commodities will push its product demand even higher.
Overall, the Global Naphtha Market projected $117.91 billion in naphtha tons production and a sharp increase of 6.34% from its current price, amounting to $3949 market value by 2030.