24 December 2009 11:00 [Source: ICIS news]
Correction: In the ICIS news story headlined “OUTLOOK ’10: Mideast naphtha capacity casts shadow over ?xml:namespace>
By Alex Davis
LONDON (ICIS news)--The European naphtha market has a healthy immediate future, but the expected new capacity from the Middle East casts threatening clouds over the coming decade, traders and analysts said.
After a disastrous fourth quarter in 2008, traders were in a severely pessimistic mood for 2009.
“It’s difficult to see any positives. Some say that what’s just happened is just a little taster for next year,” one trader said in early December.
However, it seemed no one predicted that
The main effect has been that although
“[The year] 2009 has not been as bad as we thought it would be. In fact, the first half of 2010 doesn’t look too bad either,” said one trader.
“Chinese demand has been the major factor, and that looks set to continue,” the trader added.
Arbitrage interest into Singapore during the second half of 2009 helped naphtha prices rise to $709-711/tonne CIF (cost, insurance, freight) NWE (northwest Europe) in December, as assessed by global chemical market intelligence service ICIS pricing.
Prices had been languishing at around €350/tonne CIF NWE at the start of 2009.
Significantly, by the end of the year, naphtha had actually become more expensive than gasoline, unusually pricing the product out of gasoline blenders’ considerations.
The front-month cracking margin turned intermittently positive from September onward, hitting a high of $1.40/bbl over crude oil on 9 December. This was the first time that the cracking margin for naphtha had been positive in almost two years.
In its last monthly oil report of 2009, the International Energy Agency (IEA) reported demand for naphtha in China rose from 763,000 bbl/day in 2008 to 902,000 bbl/day in 2009. This has been forecast to rise again in 2010 to 957,000 bbl/day.
In comparison, naphtha demand in OECD Europe, which fell from 1.06m bbl/day in 2008 to 980,000 bbl/day in 2009, has been forecast to show little change in 2010.
The Asian demand was driven mainly by plastics needed in the car industry.
Consequently, with Europe arguably having been overreliant on
“I definitely agree that new
“Our forecast is that naphtha will be a little bit stronger versus Brent next year, but no great change,” they added.
Market players, however, said they did not view the
“I am more and more confident that the new capacity will not be an issue just yet. There are delayed projects, and if
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