10 October 2011 13:02 [Source: ICIS news]
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According to ICIS data, the crack spread has been softening since 28 September, when it was at minus $2.80/bbl, front month Brent was at $106.15/bbl and the naphtha range was assessed at $916–924/tonne CIF NWE.
“The [softer] crack is due to weak demand,” one trader said
“The east-west arbitrage isn’t working,” a second trader explained. “Propane is still very attractive, and crude’s by the roof at $107.22/bbl this morning. Cracks are lower to offset the flat price impact.”
Crude prices climbed this morning after
While recent refinery production run cuts have tightened naphtha supplies, and kept oversupply in check, demand has been poor during recent weeks. Arbitrages have been closed to Asia and mostly shut to the
Also, for many weeks, buyers from the petrochemical industry have been opting for cheaper rival feedstock propane instead of naphtha wherever possible.
Other participants emphasise that fears for the global economy are the underlying reason for poor demand and, therefore, a weakening crack spread.
“It’s all gloom and doom,” one buyer said on 6 October. “People are anxious to buy, [but] they’re not. Buying is only on a hand-to-mouth basis.”
At 11.12 GMT on Monday, November Brent was trading at $107.06/bbl, while December Brent was at $105.19/bbl.
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