16 June 2011 13:22 [Source: ICIS news]
LONDON (ICIS)--The European naphtha cargo range fell by $29/tonne (€21/tonne) due to lower Brent crude prices on Thursday morning.
At 10.00 GMT, the naphtha range was assessed at $928-936/tonne CIF (cost, insurance & freight) NWE (northwest ?xml:namespace>
This compares with a range of $957-965/tonne CIF NWE at 3.30 GMT on the afternoon of 15 June, when August Brent was at $117.80/bbl and the crack spread at minus $9.60/bbl.
The naphtha market has been oversupplied in recent weeks and a fall in prices may lead to expectations of increased demand. However, today’s price drop has so far had little effect.
“Crude lost $6/bbl last night and recovered $1/bbl this morning. There’s not a huge effect [on demand] in
With downstream products priced in euros, the current exchange rate means that the impact of the crude price drop on petrochemical values is not sufficient to instigate demand for naphtha, the source said.
“The selling price [of downstream products] will have to collapse in July,” the trader continued. “People are waiting to see new prices.”
One buyer agreed that participants are holding back: “Crude is down, but people are hesitant to buy. They’re using their inventories first.”
The current naphtha oversupply looks set to persist unless certain factors change.
“Something must happen,” the trader said. “We need a bigger drop of Brent [prices] or a bigger drop of the structure.”
The naphtha market had been in backwardation until two weeks ago, when the price structure moved into contango. A steep enough contango can encourage the buying and storage of material for sale at a higher price at a later date.
“The contango is $3/tonne between July and August,” a producer said. “They [buyers] are not losing anything by storing.”
“Storing is a temporary solution,” the trader said. “The market needs to reassess itself. There will be a clearer picture nearer July when new petrochemical prices arrive.”
At 11.00 GMT, August Brent crude oil was trading at $114.27/bbl.
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