Europe to Asia naphtha arbitrage closed for seventh week in a row

17 September 2013 12:19  [Source: ICIS news]

LONDON (ICIS)--The naphtha arbitrage window from Europe to Asia is closed for the seventh week in a row, industry sources said on Tuesday.

The price spread between the two regions widened slightly from $11.50/tonne last Thursday to $13/tonne on Tuesday for October spot cargoes.

While dependent on factors such as freight rates, a minimum spread of $15-20/tonne is considered to be necessary for an arbitrage to open east.

A naphtha trader said: "[The arb is] not at all [open]. East-west [price spread] is still too low."

Meanwhile, the price spread for November spot cargoes was slightly wider, at $14.50/tonne.

Arbitrage is the practice of buying cargoes at a lower price and selling them at a higher price elsewhere in order to make profit.

Europe is structurally long on naphtha, and sellers need to export to the US gasoline and Asian petrochemical sectors to keep stocks in balance.

($1 = €0.75)

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By: Cuckoo James
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