Europe naphtha prices under pressure as crack drops below -$12/bbl

03 April 2013 18:04  [Source: ICIS news]

LONDON (ICIS)--European naphtha May refining margins, or crack spread, slipped below minus $12/bbl despite a steep fall in Brent crude, as poor petrochemical demand started weighing consistently on naphtha values, industry sources said on Wednesday.

The June ICE Brent lost nearly $2/bbl to $108.53/bbl (€84.65/bbl) by 16:30 GMT, compared with same period on Tuesday.

Despite the crude price decrease, the feedstock naphtha crack spread slipped by 6% to minus $12.20/bbl on Wednesday from minus $11.55/bbl on Tuesday.

The fall in refining margins is suggestive of the downward pressure on naphtha prices, industry sources said, as cracks tend to move inversely to crude prices.

There was no trade at today's open market trading session as buyers shied away from closing deals, a trader said. "Sellers can't find any buyers, as there is no support in the market," it said. 

Naphtha cargo values stayed close to seven-month lows in the high $800s/tonne at $865-867/tonne CIF (cost, insurance and freight) NWE (northwest Europe) on Wednesday, according to the ICIS assessment, falling $22/tonne from Tuesday's $887-889/tonne.

Naphtha prices are under downward pressure from "poor petrochemical margins" and "collapsing gasoline" values, the trader added.

Last week, European naphtha prices dropped 3-9% in March to hit seven-month lows.

The main application of naphtha is in the petrochemical production of olefins.

Naphtha is also used as a feedstock for gasoline blending.

($1 = €0.78)

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By: Cuckoo James
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