Europe naphtha prices hit 14-week low

04 May 2012 13:25  [Source: ICIS news]

LONDON (ICIS)--European naphtha values have fallen to a 14-week low because of softer crude oil prices and lacklustre demand for naphtha, sources said on Friday.

At 10.00 GMT, the naphtha range was assessed at $935–943/tonne (€711–717) CIF (cost, insurance & freight) NWE (northwest Europe). The June crack spread was at minus $9.40/bbl, and July Brent at $114.72/bbl.

Naphtha was last at a similar level on 23 January 2012, when the range was assessed at $937–945/tonne CIF NWE. The February crack spread was at minus $5.50/bbl, and March Brent at $110.61/bbl.

Brent crude oil prices have softened this week, exerting downward pressure on naphtha values.

At 11.07 GMT, June Brent crude oil was trading at $115.11/bbl, down 97 cents/bbl from the previous close. This was attributed to a bearish outlook for the global economy and expectations that the US non-farm payroll data, due later today, will reveal disappointing results.

Naphtha refining margins have also been extremely weak in recent days because of poor demand. This is also driving down naphtha prices.

“Yes, it’s [the naphtha market] slower, less healthy,” a trader said. “It’s partly due to gasoline [poor demand for gasoline].”

Demand for gasoline trailed off last week despite the forthcoming driving season. In turn, this means fewer requirements for blending components such as naphtha.

There are also few opportunities to relieve the naphtha oversupply building in Europe.

“Arbs [out of Europe] are closed,” the trader continued. “Or at least to Asia, it’s difficult to make it work. And petchems are not buying much [naphtha] because of the propane-naphtha spread.”

By Friday morning, the price spread between naphtha and rival feedstock propane stood at around $200/tonne, providing a clear incentive for petrochemical buyers to opt for propane rather than naphtha wherever possible.

With little current demand for naphtha and supplies set to increase as refineries soon come back online following the maintenance season, the market is likely to lengthen further.

“Arbs have to open otherwise the oversupply will build,” a buyer said.

$1 = €0.76


By: Jo Pitches
+44 208 652 3214



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