Europe naphtha recovers after slump

05 June 2007 11:43  [Source: ICIS news]

LONDON (ICIS news)--European naphtha prices showed signs of recovering on Tuesday after a $24/tonne (€18/tonne) tumble in the previous week, traders said.

Buying and selling indications on Tuesday morning were around $669-674/tonne CIF (cost, insurance and freight) NWE (northwest Europe), attributed to a stronger crude market and an improving crack spread.

The lowest bid heard in the previous week was at $656/tonne CIF NWE. The slump was partly driven by a lack of arbitrage opportunities in the gasoline market.

A number of gasoline and naphtha traders expected the Europe to US arbitrage window to open.

However, with a number of US refineries returning from maintenance, supply concerns eased, and this closed all arbitrage hope.

The lack of a coherent naphtha arbitrage window from Europe to Asia also played a large role.

During late May, market sources said this had re-opened as European naphtha values dropped. However, it was opening and closing on very short notice, according to a Norwegian-based naphtha trader.

“It was very difficult to work with the arb to Asia, as it was opening and closing in very brief spells,” the trader said.

One London-based naphtha trader said that when it opened, some cargoes had been booked to Asia.

Although the market was not moving in one clear direction, which would be driven by a gasoline arbitrage window or exporting naphtha to Asia, movement in one of those directions would boost the naphtha market, another London-based naphtha trader said.

One trader commented that the market needed to move in a clear direction.

Market prices must fall to allow material to move to Asia or demand must pick up from gasoline blenders, which will not happen until gasoline stock levels fall in the US, the trader said.

($1 = €0.74)

By: Kawai Wong
+44 20 8652 3214

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