Naphtha Prices Explained

Naphtha prices surged as material costs, freight charges, geopolitical tensions, and demand-supply dynamics dominated the market.

The market witnessed a 3.5% increase in crude oil feedstock as the Red Sea tension continues to choke the supply chain and the delayed OPEC+ production contributed to its bullish market. Experts predict that the positive trend will continue as robust demand in Asia is supported by the Indian application of heavy aromatic naphtha solvents. 

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. Natural gas processing 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 $394 per ton in 2030.