US Gulf naphtha differentials narrow on a drop off in demand

06 June 2012 23:17  [Source: ICIS news]

HOUSTON (ICIS)--The spread between US Gulf heavy naphtha and Gulf coast spot gasoline widened on Wednesday as recent demand for naphtha fell on refinery start-ups, a trader said on Wednesday.

Heavy naphtha differentials moved on Wednesday to 19 cents/gal under the lowest vapour pressure of summer gasoline for Gulf coast unleaded on the Colonial Pipeline  - which is the basis for spot naphtha trades - from 13.50 cents/gal on Tuesday, where they had been since 22 May.

Naphtha on Tuesday was $2.50-2.51/gal, and 7.8 RVP gasoline was assessed at $2.6950-2.6975/gal.

Differentials are the discount or premium at which a spot deal is made against a base price, which is spot Gulf coast pipeline gasoline for naphtha. Traders will often hedge the differential, in the spot market.

The move in differentials favours buyers, but there were no buyers to be found, sources said.

There was a surge in demand for naphtha, with buyers from BP, Motiva and Venezuela’s state-owned PDVSA during the past couple of weeks, market participants said, but a trader said the demand has since collapsed.

BP was a strong buying presence in the market the week ended 1 June at it looked for product with detailed specifications to match the refinery’s needs. Valero is the only Gulf coast refinery with naphtha meeting BP’s specifications, sources said.

There was no confirmation if Valero sold naphtha to BP.

BP has since not been present in the market, a trader said.

BP’s 406,570 bbl/day Texas City refinery near Houston restarted a gasoline-production unit on 5 June.

In addition, market participants said there were two 400,000 bbl tenders, to be filled by US Gulf producers, from Venezuela’s PDVSA for purchasing heavy naphtha to dilute crude oil - which helps heavy crude oil to move through the pipelines.

Both tenders has already been filled, a broker and trader said.

A trader said there is a rumour that PDVSA is considering purchasing another tender for 400,000 bbl of heavy naphtha for the end of June. If this tender is made, naphtha will likely strengthen, he said.

Finally, Motiva’s 600,000 Port Arthur refinery in Texas is restarting is crude distillation unit, which has ended its presence as a buyer for naphtha, a trader said.


By: Sheena Martin
+1 713 525 2653



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