Market uncertainty disrupts demand for Europe naphtha

01 July 2011 13:21  [Source: ICIS news]

LONDON (ICIS)—The European naphtha cargo market has seen very few physical trades this week, sources said on Friday.

The sources said that this is due to anxiety stemming from factors including the International Energy Agency (IEA) making 60m bbl of oil available to the market in order to offset Libyan disruption. Other factors include weak demand from the petrochemical industry and closed arbitrages to Asia and the US.

“It’s been very quiet. Everybody is waiting and only buying what’s really needed,” one buyer said. “Oil is the key thing.”

A trader said on 30 June: “There is too much uncertainty around the IEA release story. All eyes are on the refineries. This release might kill small refineries, which would mean bullish naptha. If naptha goes up and so does crude, petchems will focus on LPG.”

A number of crackers are able to switch between feedstocks, opting for naphtha or LPG depending on prices. Higher naphtha values in relation to those of propane or butane will encourage many buyers to opt for liquefied petroleum gas (LPG).

Last week, naphtha buyers were said to be holding back in order to wait for the settlement of July contract prices for downstream products such as propylene and ethylene before purchasing further quantities of naphtha.

Prices were confirmed on 30 June, with ethylene agreed at €1,090/tonne ($1,580/tonne), a reduction of €95/tonne from June. Propylene settled at €1,130/tonne, a reduction of €75/tonne.

This has so far had no effect on demand for naphtha.

“There’s been no change from ethylene and propylene [settlements],” one trader said. “Petchem demand is poor.”

Another source said that a lack of arbitrage opportunities is also subduing demand for naphtha.

“The market is at a standstill,” the trader said. “There’s not much on offer, but there’s not much demand either.”

At 11.15 GMT, naphtha was trading at $912-920/tonne CIF (cost, insurance & freight) NEW (northwest Europe).

($1= €0.69)

By: Jo Pitches
+44 208 652 3214

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