Europe naphtha weekly trading activity stagnant, despite crack rise

18 October 2013 17:50  [Source: ICIS news]

LONDON (ICIS)--Naphtha weekly trading activity in the open market platform has failed to pick up from last week, despite a rise in the November crack spread, industry sources said on Friday.

A crack spread normally strengthens on the back of either a fall in upstream ICE Brent crude oil futures or a pick up in trading activity in the window.

The European naphtha crack spread rose to a three-week high despite the slow window activity and the poor fundamentals in the naphtha market.

The naphtha crack spread has strengthened from minus $7.00s-8.00s/bbl in late September and early October to a high of minus $6.70/bbl this week.

A crack spread is the price difference between crude oil and naphtha, calculated in US dollars per barrel. Many traders use the crack spread instead of the flat price value to buy and sell naphtha.

A healthy purchase of the crack spread by bankers and refiners in the swaps market has been touted by a few naphtha traders as the reason behind the strength in the crack spread.

But fundamentals still remain poor, and the European market is oversupplied because of a fall in exports that has been sustained for some weeks.

In the open trading window, the first cargo deals of the week were concluded on Wednesday as Glencore bought two cargoes from oil major BP and from Morgan Stanley. Buyers purchased three cargoes this week, same as last week.

The cargoes sold this week are mostly due to load in early November, compared with most of the cargoes sold last week loading around around 21-31 October.

Naphtha prices rose week on week on high upstream ICE Brent crude oil values and the strong November crack spread, and were assessed at well-above the $900/tonne (€666/tonne) mark this week.

($1 = €0.74)

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By: Cuckoo James
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