Europe naphtha at four-month low on weaker crude prices

27 June 2011 13:08  [Source: ICIS news]

(ICIS)--European naphtha fell to an assessed range of $858-866/tonne (€609.2-614.9/tonne) CIF (cost, insurance & freight) NWE (northwest Europe) at 10.00 GMT on Monday, its lowest level since February.

A combination of softer Brent crude oil prices and a weaker naphtha crack spread exerted downward pressure on naphtha prices.

At 10.00 GMT, naphtha slid to the aforementioned range, with August Brent crude oil at $103.89/bbl and the July crack spread at minus $7.30/bbl. This compares with a range of $873-881/tonne CIF NWE at 15.30 GMT on Friday, when August Brent was at $105.25/bbl and the crack spread at minus $7/bbl.

A level as low as this latest range was last seen on 15 February, when naphtha prices were assessed at $857-865/tonne CIF NWE, front-month Brent was at $103.16/bbl and the crack spread at minus $6.65/bbl.

While in recent weeks naphtha prices have fallen from the extreme highs of April, when inflated crude oil prices were driving product values upwards, demand for naphtha has been poor and the market has been long. Last week saw some tightening of the market, but many sources expected this to be short lived.

Today’s weaker prices therefore ought to be welcomed. However, the effect of lower values on demand for naphtha is a little more complicated.

“With the current low crude price, refinery margins should be boosted,” one trader said. Alas, while softer naphtha prices might attract more buying from the petrochemical industry this week, there are nevertheless factors limiting the extent of purchasing, the source also said.

Other sources agreed that, as has been the case for the last few days, buyers are holding back, waiting for July contract prices for downstream products to be settled before purchasing more naphtha.

“As the petchems outlook for C2 [ethylene] and C3 [propylene] is not great, crackers might get trims, so the [naphtha] market should go longer. A lot of people want to see what will happen to C2 and C3 monthly contract prices before moving aggressively,” the trader said.

The naphtha price structure displaying just a slight contango of $1.50/bbl to $3/bbl during the next six months is said to indicate the market “holding its breath.”, the trader also said.

At 11.05 GMT, August Brent crude oil was trading at $104.10/bbl.


By: Jo Pitches
+44 208 652 3214

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