Traders try to exploit Europe to Asia naphtha arb

27 March 2008 10:56  [Source: ICIS news]

SINGAPORE (ICIS news)--US trader Koch has been unsuccessful in its attempt to move an arbitrage cargo of around 80,000 tonnes of naphtha to Japan on 1 April, industry sources said on Thursday.

The vessel Yang Lin Wan was supposed to move the material from Rotterdam, they said, adding that Koch had failed in an earlier attempt to move a similar cargo in the second half of March and that it could head for Asia soon.

Trading sources said that naphtha cargoes were being diverted to the Asian markets as excess supplies had lowered prices in Europe.

ExxonMobil had earlier fixed a vessel to move 37,000 tonnes of heavy naphtha from Rotterdam to Singapore towards the end of March, sources said.

The US major normally purchases its naphtha from Asian suppliers, and the current weakness in the European motor gasoline (mogas) market must have prompted it to move cargoes to Asia rather than sell at a low price in Europe, they said.

Around 300,000-400,000 tonnes of naphtha supplies slated for loading in the second half of March were expected to arrive in northeast Asia (NE Asia) during the first half of May.

The east-west differential stood at around $34/tonne (€21/tonne) and could widen on firming demand from NE Asia end-users.

Freight cost from the west was estimated at around $32-37/tonne, depending on the size of the vessels used, sources said, adding that traders usually preferred to use 55,000-75,000 tonne vessels.

Asian naphtha prices firmed ahead of the close, with first half of May prices notionally pegged at $907-908/tonne, and second half of May at $904-905/tonne.

European open spec naphtha cargoes were assessed at $876-880/tonne CIF (cost, insurance and freight) NWE (northwest Europe).

 

Traders reported an April crack spread at -$6.50/bbl to -$6.00/bbl, reflecting continued weakness relative to the crude oil market.

 

Some sources said there is also potential for a Europe-to-US gasoline arbitrage window to open in April, which would provide much needed support for the European naphtha market for blending purposes.

($1 = €0.63)

Kawai Wong contributed to this article

By: Desmond Chia
+65 6780 4359

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