Europe naphtha prices fall 15% in a month on lower crude, poor demand

09 May 2012 12:17  [Source: ICIS news]

LONDON (ICIS)--European naphtha prices have fallen by approximately 15% over the past month, according to ICIS data on Wednesday.

This is attributed to a combination of lower Brent crude oil prices and poor demand for naphtha exerting downward pressure on the crack spread.

At 10:00 GMT, the naphtha range was assessed at $912-920/tonne CIF (cost, insurance and freight) NWE (northwest Europe). July Brent crude oil was trading at $111.61/bbl and the June naphtha crack spread was at minus $8.70/bbl.

Just over a month ago, on 5 April, naphtha was assessed at $1,071-1,077/tonne CIF NWE. May Brent was trading at $122.70/bbl and the April naphtha crack spread was at minus $2.70/bbl.

Brent crude oil prices have softened during recent weeks on economic fears. The effect has been exacerbated during recent days by growing political uncertainty in the eurozone region.

Naphtha refining margins continue to face downward pressure because of poor demand from the gasoline sector and the petrochemical industry. A lack of arbitrage opportunities is also resulting in an oversupply building up in Europe.

 “Arbs [out of Europe] are closed,” a trader said on 4 May. “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.”

On the same date, rival feedstock propane was trading at around $200/tonne below naphtha, ensuring that petrochemical buyers opted for the former wherever possible.

While gasoline refining margins strengthened on 8 May, US demand for gasoline remained lacklustre, limiting requirements for blending components such as naphtha.

There are fears that European naphtha oversupply will build further if arbitrage opportunities fail to materialise as refineries come back on line following the maintenance period. This could exert further downward pressure on prices.

By: Jo Pitches
+44 208 652 3214

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