Guotai Junan Futures: Ethylene valuation is relatively high, and naphtha has strong downward support

Proximal Asian naphtha experiences a significant pullback, and the refining product spread against naphtha quickly recovers.
From the supply side, supply in the Middle East remains low, with monthly exports of over 4 million tons now down to about 500k tons.
However, external supply from the Middle East is replenished quite a bit, with Mediterranean, European, and North American arbitrage logistics increasing by 800,000 to 1 million tons per month.
On the demand side, Asian ethylene plants are experiencing large-scale shutdowns, with over 16 million tons of additional offline capacity offsetting most of the supply reduction.
Naphtha supply and demand are both decreasing, and the westward arbitrage logistics are expected to arrive from April to early May.
From the current static balance perspective, naphtha should still be valued at a level that makes ethylene unprofitable, but with short-term ethylene remaining offline, the impact of arbitrage logistics arriving could enable some ethylene to turn profitable, because ethylene is currently overvalued, and naphtha has strong downward support.
(Guotai Junan Futures)