Europe naphtha trades up $50/t in a sustained week-long bull run

10 May 2013 13:12  [Source: ICIS news]

By Cuckoo James

Naphtha crackerLONDON (ICIS)--Europe naphtha cargoes traded up by $50/tonne (€39/tonne) week on week, rallying somewhat from a 9% price drop in April as the bulls overrode the bears in a seller's market, industry sources said this week.

The main driver behind the bull run is the scarcity of prompt naphtha cargoes for sale relative to last month, sources said.

Europe naphtha cargoes on the daily open market platform traded up by $50/tonne from $790/tonne CIF (cost, insurance & freight) NWE (northwest Europe) on the previous Thursday to $840/tonne this Thursday.

Swiss trader Vitol sold naphtha cargoes to Glencore, Gunvor, Morgan Stanley and BP over the time period.

A naphtha trader said: "One thing that got everybody excited this week was [the] stronger window [open market platform], [and a] bit less naphtha on prompt for the next two weeks as it is balanced on the front - if you need some you got to pay."

Additional factors included "bullish news on Skikda, the [healthy] exports to Asia, plus margins on the refineries going lower so people are afraid they [refineries] will cut production," the trader added.

The trader pointed out the above factors had overrode more bearish considerations among industry players.

"That changed the overall [bearish] view due to low domestic petchem demand, fear Asia will collapse at one moment since Asia is receiving too many [naphtha] tonnes, and the gasoline naphtha spread is weaker," it said.

Naphtha values first started dropping below the $900/tonne mark in mid-March. Prices had been in the $900s/tonne for most part of the second half of 2012 and early 2013.

Naphtha prices fell by 9% - or approximately $80/tonne - from $883-887/tonne CIF NWE on 1 April to $805-808/tonne CIF NWE on 30 April.

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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