01 February 2011 13:42 [Source: ICIS news]
LONDON (ICIS)--An oversupply of naphtha in Europe has resulted in the crack spread falling to minus $4.85/bbl, a drop of $8.55/bbl in four weeks, market participants said on Tuesday.
On 4 January, the crack spread was at around plus $3.70/bbl.
Recent poor demand from the European petrochemical industry has led the naphtha market to become oversupplied.
Last week, a crack spread ranging from minus $2/bbl on 24 January to minus $3.8/bbl on 28 January enabled the opening of an arbitrage, with surplus material moving from Europe to Asia.
Several February-loading cargoes were thought to be destined for Asia, according to sources.
A further weakening of the crack spread would likely encourage the movement of more material to Asia, sources said.
Demand for naphtha from the European petrochemical sector has been poor because companies are already holding high levels of stock.
In addition, some participants were favouring lower-priced butane over naphtha.
There was little difference in the flat price of naphtha during the same four-week period. On Tuesday morning it was assessed at $854-862/tonne CIF (cost, insurance and freight) NWE (northwest Europe), compared with the 4 January range of $857-865/tonne CIF NWE.
Naphtha cargo prices were now being shielded from the effects of the weakening crack spread by the influence of higher crude oil prices.
At 12:30 GMT, Brent crude was at $100.51/bbl. Four weeks ago it was at $93.53/bbl.
On 31 January, Brent crude oil rose above $100/bbl on fears that the political unrest in Egypt would affect supplies of crude oil.
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