FocusEurope naphtha rebounds on gasoline demand, firm crude

11 July 2013 13:36  [Source: ICIS news]

By Cuckoo James

Naphtha crackerLONDON (ICIS)--European naphtha prices have rebounded from months of persistent low values and may soon cross the $900/tonne mark on improved gasoline demand and firm crude oil values, industry sources said on Thursday.

Naphtha prices and upstream ICE Brent crude oil futures are now similar to levels seen in late March, but naphtha values have not yet hit the $900/tonne mark.

Northwest European naphtha values first started dropping below the $900/tonne mark in mid-March. Before then, prices had been in the $900s/tonne for most part of the second half of 2012 and early 2013.

In the upstream crude oil market, May-August ICE Brent crude oil futures settled between $108-110/bbl on 28 March, compared with August ICE at around $108/bbl (11:00 GMT) on Thursday.

On average, naphtha cargoes were priced at $885/tonne CIF (cost, insurance & freight) NWE (northwest Europe) for the week ending on 29 March, and at $886.50/tonne CIF NWE late on Thursday morning.

Prices have received an additional boost from improved naphtha demand for gasoline blending purposes, and has kept the August naphtha crack spread relatively strong at minus $8.30/bbl on Thursday.

A naphtha trader said: “The mogas-nap spread in July has gone up to $121/tonne, from approx $100/tonne at the start of the week.”

ICIS data shows the price spread between gasoline and naphtha has risen from $107/tonne last Wednesday to $131/tonne this Wednesday. A widening price differential with gasoline usually leads to better naphtha demand from the gasoline blending sector.

A petrochemical buyer said: “Gasoline market, it is touch and go... it was very weak over the last two weeks... it has recovered a bit.”

A third trader said: “We have started drawing [naphtha] stocks now [for gasoline].”

Nevertheless, the impact could be more on market sentiment and might not translate into actual exports, especially to the key US gasoline market, sources said.

“It [US arbitrage] is closer to getting open now than in a long time, but I am still not convinced they will really be there to commit to more tonnes than they are already intrinsically getting,” the third trader said.

($1 = €0.78)

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By: Cuckoo James
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