Open-spec naphtha was assessed at $116.00/$118.00 per tonne for delivery in the first half of March, down $1 from late Wednesday in Tokyo. Second-half March was assessed at $117.00/$119.00, also down $1.

A cargo for second-half April was believed to have changed hands late Wednesday at $119.50, and a second-half March cargo at $117.50, but details were sketchy, traders said.

As the market stays bearish with no spike in demand in sight, traders are now beginning to expect a wider inter-month contango of about $3-$4, compared with current levels of about $1.

"Usually if the contango widens that much, arbitrage cargoes would stop flowing into Asia, but as Europe (demand) is so weak, arb cargoes could still flood" the Asian market, a trader with a petrochemical firm said.

The value of naphtha hinges heavilyon crude prices. But a trader with another petrochemical producer said it could go as low as $110.00, provided crude prices do not rally.

The first trader said ethylene producers have found it difficult to find homes for their excess material for exports, and that the market could collapse if they fail to find buyers.

Traders said, therefore, production cuts at ethylene centres are a likelihood in the near future, although they were not sure if such cuts would start as early as in February.

The Japan Petrochemical Association's chairman Shigenori Koda said on Thursday he did not expect December's record-high level of ethylene production would last three or four mouths.

Although he did not specify when production cuts might start, he said Japan's ethylene production is likely to fall by several hundred thousand tonnes in 1999 from 7.076 million tonnes in 1998.