18 July 2012 13:13 [Source: ICIS news]
“Yep, [there’s support], Asia is a bit stronger,” a trader said.
Following last week’s fixing of at least three long-range (LR2) vessels for Asia – thought to be one vessel each booked by Azerbaijan’s Socar, Swiss trader Gunvor and Norway’s Statoil for loading in mid-late July – Switzerland-based Vitol has now fixed 85,000 tonnes from northwest Europe to head to South Korea. The vessel is about to be loaded.
The total amount of European naphtha arriving in Asia in August could therefore be close to 590,000 tonnes.
This movement of volumes east has eaten into the European oversupply. There is little else currently supporting the European market.
“Gasoline [demand] is rather slow, and petchems [are] quiet as well,” the source said. “Europe is always long on a monthly basis, so we need [arbitrages].”
The recent strengthening of the Asian naphtha market is welcome news for Europe, as it has facilitated the aforementioned fixtures.
ICIS reported on 17 July that Asia’s naphtha crack spread spiked by 9.6% to close at a two-month high of $93.23/tonne (€75.52/tonne). This resulted from strong buying activities amid high run rates at regional crackers.
However, as ICIS reported on 12 July, many Asian market participants are sceptical regarding how long this strength can be sustained. Downstream Asian petrochemical demand is still very subdued.
Some Asian participants believe demand in China should pick up by the end of July, but are unsure of the duration of any increased requirements. Some believe it might only be sustained for less than a month.
Regarding the expectations of Asian strength not persisting, the trader replied:
“That is what they all say.”
Furthermore, despite the movement of volumes east, there is still surplus stock in Europe.
“There’s still a lot of product around, buying is muted in [northwest Europe],” the trader said.
($1 = €0.81)
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