Increases in Europe naphtha prices start to affect demand

05 November 2010 17:41  [Source: ICIS news]

LONDON (ICIS)--The recent increases in prices of naphtha in Europe, which have been driven by higher crude oil futures, have hampered demand, market sources said on Friday.

On 3 November, the prices were around $780/tonne CIF (cost, insurance and freight) NWE (northwest Europe), their highest level since September 2008.

Prices have continued to rise throughout the week and by Friday afternoon, they stood at around $789/tonne CIF.

According to one market source, a number of cargoes were on offer but there was little interest in them.

Demand from the petrochemical industry has been strong during recent weeks, and sellers have been taking advantage of favourable margins.

However, increasing naphtha prices have put pressure on those margins, making it less economically viable to purchase naphtha as a feedstock.

Buyers were now using existing stocks instead of procuring new material, sources said.

A trader predicted that if naphtha prices continue to rise for much longer, demand would be hit even harder, as buyers would be even less able to afford naphtha.

Crude oil futures reached two-year highs on Friday. At GMT 15:50, December Brent was trading at $87.93/bbl, down $0.07/bbl. Earlier, Brent hit a high of $88.80/bbl, up $0.80/bbl.

At the same time, December WTI was trading at $86.58/bbl, up $0.09/bbl. Earlier, it hit a high of $87.22/bbl, up $0.73/bbl.

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By: Jo Pitches
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