Europe naphtha prices fall to 20-month low on lower crude, poor demand

08 June 2012 13:51  [Source: ICIS news]

LONDON (ICIS)--European naphtha prices have fallen to the lowest level seen since October 2010 on the back of softer Brent crude oil values and poor demand, sources said on Friday.

At 10.00 GMT the naphtha range was assessed at $731-739/tonne CIF (cost insurance and freight) NWE (northwest Europe). August Brent crude oil was at $97.73/bbl and the July crack spread at minus $14/bbl.

Naphtha was last at a similar range on 1 October 2010, when prices were assessed at $734-742/tonne CIF NWE. November Brent was at $83.13/bbl and the October crack spread at minus $3.30/bbl.

Brent crude oil prices have recently been losing ground due to anxiety stemming from the eurozone debt crisis. On Friday morning prices fell sharply in tandem with global stock markets after the chairman of the US Federal Reserve, on Thursday, failed to give concrete plans of further stimulus measures to boost the US economy.

While having remained in negative territory since January 2011, the naphtha crack spread has weakened significantly during recent weeks in response to poor demand and a lengthening market.

On softening to the aforementioned value of minus $14/bbl this morning, a producer said: “There is no buying. Asia is weak…”

A trader added: “The market is oversupplied, there’s a poor macroeconomic environment.”

When asked whether naphtha prices could fall further, a second trader said: “That is the one million dollar question… I think they can.”

“Naphtha [prices] could go down further… But they could soon bottom out,” the producer said.

The second trader added: “It’s [the price drop] amazing. But then chemicals [prices] are falling like a stone as well. There are some horror stories around.”

Nevertheless, the second trader agreed with the recent consensus among market participants that the situation should not be as dire as in 2008, as less stocks are being held.

“I agree, people are more prepared this time. But the macro-economics have to change, though.”

By: Jo Pitches
+44 208 652 3214

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