Europe naphtha margins improve on Total strike supply worries

19 February 2010 15:09  [Source: ICIS news]

LONDON (ICIS news)--Europe naphtha cracking margins improved by almost $1/bbl following supply worries in the wake of indefinite strikes at oil firm Total’s French refineries, traders said on Friday.

Demand for the product had been softening during the week as a result of players attending International Petroleum Week in London, and Lunar New Year celebrations in Asia.

This pushed the cracking margin against crude oil down from -$0.50/bbl on 12 February to -$1.20/bbl by Wednesday, balancing out crude’s gains.

However, the announcement on Thursday that strikes currently affecting all of Total’s French refineries would be open-ended had led to tremors in the naphtha market that prolonged action would lead to supply problems.

“The strikes have got everyone all excited, and the crack is currently -$0.30/bbl,” said one trader.

The trader added that for the time being the effects were purely felt in the paper market, with market participants hedging against possible supply risks. Most buyers were covered for prompt physical material for the next couple of weeks, said the source.

The strikes, organised by French union CGT, began on Wednesday initially for 48 hours, before employees voted on Thursday to extend the period indefinitely.

The industrial action was in protest of proposals to close the Dunkirk refinery, which had been idled since September 2009.

European spot naphtha was assessed by global market intelligence service ICIS pricing at $682-692/tonne CIF (cost, insurance, freight) NWE (northwest Europe) on Friday afternoon.

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By: Alex Davis
+44 20 8652 3214



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