Aggravating Naphtha production in the East European Region
The production of Naphtha has already started withering as few refineries have begun their spring maintenance, and the decreasing export rates have been worsening the state of feedstock (naphtha) production in Russia. Market players state that around 4 million capacities of naphtha production have been shut since February, 22. Small and medium-sized refineries which are specifically run for exporting feedstocks like Naphtha are expected to run at 50% capacity from April 2022 onwards. Few refineries in the southern region of Russia, namely Tuapse and Novoshakhtinsky plants, have reduced their crude intake as there was no way to ship their products.
The international market is avoiding Russian Naphtha supply due to the sanctions imposed on Russian imports of oil and gas in retaliation to Moscow's invasion of Ukraine. Even the domestic market has been dodging its own country's Naphtha. Taif refinery has decided to reduce its production as few Russian petrochemical industries have decided to stop taking its Naphtha. Since Western countries have been avoiding Russian oil and gas, they have been turning to the East for buyers and increased their exports significantly to countries like China and Kazakhstan in March FY22.
The war has not only affected the production in Russia, but also Belarus, that exports most of its Naphtha to Ukraine. Once the war started, Ukraine stopped importing Naphtha from Belarus, causing production halts in Belarusian refineries. Ukraine's UkrTatNafta refinery has also stopped its production as it has been reportedly attacked by Russian forces earlier this month.
Supply tightness in the naphtha is expected to continue for the entire quarter ending June as per ChemAnalyst market intelligence analysis. Although OPEC had promised to increase their crude oil outputs starting April, the general increase in demand in the commodities and energy markets will most likely neutralize any significant increase in supply of crude oil as planned by the oil exporting countries.
