Upward pressure remains on Europe naphtha

21 May 2007 13:34  [Source: ICIS news]

LONDON (ICIS news)--There was still upward pressure in the European naphtha market on Monday after open spec cargoes reached new highs last week as gasoline demand continues in the US, London-based traders said.


Open spec naphtha cargoes reached new highs last week with a 12,500 tonne cargo sold at $712/tonne (€530/tonne) CIF (cost, insurance and freight) northwest Europe (NWE) on 14 May.


An additional two cargoes also exchanged on that day at $706/tonne and $709/tonne.


Open spec naphtha cargoes were assessed in the range of $702-706/tonne CIF NWE on Monday, up $2 from the previous close.


The continued bullish nature of the European naphtha market was attributable to the gasoline market.


One London-based naphtha trader said that a large proportion of material was headed towards gasoline production in Europe.


Gasoline producers were hoping that the Europe-US arbitrage window would open to alleviate concerns over a shortfall in gasoline inventory ahead of the US driving season.


One naphtha trader said that the Europe-US arbitrage was open on 17 May. However, before US traders could react, spot prices in Europe jumped and the Europe-US arbitrage was closed.


The Europe and Mediterranean to Asia arbitrage window was also briefly open on the evening of 15 May to the morning of 16 May.


This brief opening was not sufficient for any European trader to fix material to Asia, one trader added.


A London-based trader said that if the gasoline arbitrage window opened up and remained open, demand for European naphtha would strengthen as the gasoline pool would eat up more naphtha.


However, if the gasoline arbitrage window was brief, naphtha values in Europe may fall, re-opening the arbitrage window to Asia.



By: Kawai Wong
+44 20 8652 3214

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