FocusEurope naphtha propped up by US gasoline

06 September 2007 17:15  [Source: ICIS news]

By Kawai Wong

 

LONDON (ICIS news)--European naphtha was being supported by tumbling US gasoline stocks despite weak petrochemical support and no arbitrage options, market sources said on Thursday.

 

Over the past fortnight naphtha has risen around $63, pushed up by higher gasoline prices caused by refinery maintenance and recent production outages in the US.

 

“The naphtha market is not that strong, but gasoline was keeping it supported,” one trader said.

 

Open spec naphtha cargoes were assessed at $680-685/tonne CIF (cost, insurance and freight) NWE (northwest Europe) range on Thursday. A fortnight ago, bids and offers were heard in the range $618-622/tonne CIF NWE.

 

The Energy Information Administration (EIA) reported a 1.5m barrel fall in gasoline stock from the previous week. This followed a 3.6m barrel drop the week before, heightening concerns in the market.

 

Benchmark 10ppm gasoline barges in Europe have risen over $70/tonne during the fortnight. On Thursday afternoon, gasoline barges exchanged hands in the range $717-733/tonne FOB (free on board) AR (Antwerp, Rotterdam).

 

The rise in European gasoline values have not permitted arbitrage exports to the US due to both the price spread between the regions and roducers switching from summer grade to winter grade production.

 

One naphtha trader said gasoline was confusing the European naphtha market, which was currently facing relaxed demand from the petrochemical sector and no arbitrage options out of Europe.

 

The petrochemical sector has been in holiday mode in recent weeks with a number of turnarounds in the industry and holiday commitments had led to quiet spot markets, traders said.

 

However, most turnarounds were expected to be completed by mid-to-end of September and most traders and brokers would have returned from summer holidays by that time.

 

Arbitrage options for naphtha out of Europe have been closed since May in line with a higher level of exports from India, the region’s largest exporter.

 

Arbitrage options to Asia were said to be impossible with the current price spread between the regions.

 

The first half October contract in Asia closed at $678-679/tonne CFR (cost and freight) Japan on Thursday, which does not support an arbitrage window.

 

($1 = €0.73)

By: Kawai Wong
+44 20 8652 3214

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