13 September 2012 13:58 [Source: ICIS news]
LONDON (ICIS)--The outlook for the European naphtha market is still considered bleak as a result of subdued demand and few opportunities to offload surplus stock, sources said this week.
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“Yes, it’s [the outlook] bleak, it will lengthen more unless arbs open,” a trader said.
On Thursday morning, the east-west spread for October prices stood at $3-4/tonne. While dependent on factors such as freight rates, it is generally thought that a spread of $15-20/tonne (€12-16/tonne) is required for an arbitrage to open to
European naphtha prices lost $11/tonne this morning compared with 15.30 GMT on Wednesday, as a result of a weaker crack spread. ICIS reported that Asian naphtha prices have also lost ground - this softening stems from muted petrochemical demand in the region.
“The east is a little down as well, so despite the lower [European naphtha] crack, there’s no change on the east-west spread, and the arb is still closed,” the broker said.
Nevertheless, the further weakening of the crack spread this morning– minus $6/bbl for October, compared with minus $4.55/bbl at 15.30GMT on Wednesday, and minus $3.80/bbl at the same time on Tuesday – is welcome news. It exerts downwards pressure on naphtha prices, which many believe is necessary in order to open arbitrages and relieve market length.
On Wednesday, a trader said: “
While sources said there are shortages of naphtha in Asia, as a result of a reduced supply from
When asked whether volumes might be sent east regardless, the source said: “Yes, they [a major company in particular] are putting LRs [long range vessels] carrying 80,000-90,000 tonnes on subs [booked subject to conditions] to go east. They don’t mind losing on the physical as they are making so much on the paper [market]. But everything can’t be absorbed by Asia, so
“There are no solutions [to move stock out of
($1 = €0.78)
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