NewsFlashEurope naphtha trades at $1,000/tonne

20 May 2008 12:10  [Source: ICIS news]

LONDON (ICIS news)--European open spec naphtha cargoes were bid and offered at more than $1,000/tonne (€640/tonne) and paper trades done at $1,007/tonne on ongoing crude strength, market players said on Tuesday.

A European trader confirmed on Tuesday morning that European naphtha swaps had been traded over $1,000/tonne CIF (cost, insurance and freight) NWE (northwest Europe) and the trader reported she had just bought at $1,007/tonne.

The developments bring physical material to around $1,007-1,009/tonne CIF NWE based on the front-month June crack spread, which was reported at -$12.30/bbl to -$12.00/bbl relative to crude.

Despite paper trades having been concluded over this psychological point, physical material had yet to be traded above $1,000/tonne.

According to one London-based naphtha trader, the market was now catching up with the gains in the crude oil sector and crack spreads were improving.

The naphtha market had been failing to keep up, seeing the crack spread move deeper and deeper into negative territory. A fortnight ago, the front-month crack spread fell to as low as minus $18/bbl.

One broker said that $1,000/tonne naphtha in Europe is as significant as when crude hit $100/bbl in January this year.

Another source added that just as crude had no limitations when it broke that barrier, now that naphtha has breached the $1,000/tonne mark its psychological barrier had been broken.

"The next step is to see a public trade at or above $1,000/tonne and then the next barrier would be further down the line. No-one would think, I can’t buy above or offer above this value," the source said.

Traders noted plentiful material in Europe and continuing weaker demand. The one thing that has changed was marginally stronger support from the gasoline sector, due to the US summer driving season.

European refiners had been exporting gasoline to the US in recent weeks, which had provided some support for the naphtha market.

($1 = €0.65)

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By: Staff Reporter
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