27 June 2008 14:20 [Source: ICIS news]
By Nel Weddle
LONDON (ICIS news)--Progress in third-quarter Europe ethylene (C2) and propylene (C3) contract negotiations has been further stymied by crude oil’s recent breach of $140/bbl, market sources said on Friday.
“There is limited progress,” said a producer. "Some moves have been made but with crude at $140, we’ll want to watch it for another day or two."
Another key producer said that it would “not be active to settle today” adding that it would have further internal discussions to discover whether the price that it was offering was still valid.
Brent crude was close to $142/bbl and assessed values for naphtha surged to $1,135-1,139/tonne (€715-718/tonne) CIF (cost insurance freight) NWE (northwest Europe) as a result, according to global chemical market intelligence service ICIS pricing.
Contract participants had already been engaged in a tough round of discussions, made even more challenging by daily swings on naphtha prices.
Some sources said that they had little serious discussion with their counterparties as everyone was taking time to digest price ideas.
There was still a wide gap between buying and selling ideas and the constantly shifting upstream backdrop was not helping anyone come to a reasonable and fair conclusion.
Most market observers said that they anticipated a three-digit increase for ethylene and a two-digit increase for propylene from the second-quarter settlements.
Others predicted that they would be within a narrower range of plus €100-200/tonne for C2 and a rollover to plus €80/tonne for C3.
Negative cracker margins were driving producers’ calls for increases and while most consumers recognised this and went some way to accepting that significant increases were justified, some felt that the downstream derivative situation was still not being adequately taken into account.
($1 = €0.63)
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