Europe naphtha crack falls below $12/bbl on flat prices, crude hike

30 April 2013 17:05  [Source: ICIS news]

LONDON (ICIS)--European naphtha prices have been steady in the $810s/tonne CIF (cost, insurance, freight) NWE (northwest Europe) for three consecutive days, despite a rise in ICE Brent crude oil futures, leading to a drop in the region's naphtha refining margins - or crack spread - against Brent, sources said on Tuesday.

ICE Brent crude oil futures for June rose almost $1.00/bbl from $102.49/bbl at 16:30 GMT on 25 April to $103.43/bbl on 29 April. However, naphtha traded at $812/tonne CIF NWE on Thursday and only increased slightly to $813/tonne CIF NWE on Monday in the open market trading window. Prices continue to be at nine-month lows.

May naphtha refining margins, or crack spread, fell from -$11.30/bbl on Thursday to -$12.20/bbl on Monday as a result.

A buyer from the petrochemical sector said: “Naphtha is very weak for this time of the year, with cracks around -$12/bbl.”

A trader said on Tuesday: "[Naphtha] crack is very low."

Earlier in April, European May naphtha refining margins had been firmer at -$10.30/bbl, supported by a drop in ICE Brent crude oil futures and stable naphtha prices.

Meanwhile, naphtha prices hitting nine-month lows in April has helped cracker operators using naphtha as a feedstock, sources said.

The naphtha buyer said: “Ethylene margins are reasonable, the money which we are making from [producing] ethylene is okay, that's how we benefit from it [low naphtha prices]. So the timing of the shutdowns is a bit bad for BASF because the margins are good now.”

BASF’s cracker at Antwerp – Europe’s largest cracker - was due for a two-month planned maintenance shutdown in late April.

ICIS margin analysis reveals that the average European April contract margins for crackers using naphtha as a feedstock to produce ethylene is the highest since June 2012.

Supply is long in the northwest European naphtha market, despite an open outbound arbitrage to Asia. The spring cracker maintenance season has dampened domestic petrochemical demand, while gasoline blending demand from the US remains lower than expected.

The main application of naphtha is in the petrochemical production of olefins. Naphtha is also used as a feedstock for gasoline blending.

($1 = €0.77)

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By: Cuckoo James
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