Europe-Asia naphtha arb goes unused on volatility

03 April 2008 14:59  [Source: ICIS news]

LONDON (ICIS news)--European open spec naphtha exports to Asia are grinding to a halt despite an open arbitrage due to less demand and volatility in Europe, traders said on Thursday.

Spot prices have fluctuated in a range of $842-882/tonne CIF (cost, insurance and freight) NWE (northwest Europe) this week, and were around $855-883/tonne CIF NWE last week.

This volatility in the market has put traders on the fence, according to a broker, as a poorly judged trade could result in significant losses.

Moreover, there was little consensus in the European market regarding the value of naphtha, especially during the beginning of the week, where bids and offers for material determined a wide spread.

On Monday, open market offers in the market ranged from $869-885/tonne CIF NWE. These wide offers put buyers on the sidelines and no bids were heard.

Some consensus in the market did arrive later in the week, seeing 12,500 tonne cargoes being traded at $843/tonne CIF NWE and $847/tonne CIF NWE.

One broker said naphtha spot prices have moved away from actual supply and demand fundamentals since recent high values do not actually reflect actual buying interest in the market but the fluctuations in the crude oil market.

The weak US dollar has also attracted speculative investors to use dollar-priced commodities to hedge against inflation and this speculation had fuelled the recent record highs for crude and naphtha, traders added.

By: Kawai Wong
+44 20 8652 3214

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