Europe naphtha crack hits new yearly high on expensive propane

20 November 2013 17:37  [Source: ICIS news]

LONDON (ICIS)--The European naphtha differential over ICE Brent crude oil futures rose to a new record high for 2013 as alternative petrochemical feedstock propane rose in value, industry sources said on Wednesday.

European naphtha prices have fallen below propane values for the first time in 2013 as prices for propane surged on tightening supply.

The differential - or the 'crack spread' - is a sign that sentiment in the naphtha market is strong, as traders use it to close swaps transactions.

The spread stood at minus $3.70/bbl on Wednesday evening, higher than the previous yearly record of minus $3.95/bbl recorded on 12 November.

The crack had fallen as low as approximately minus $5.00/bbl since 12 November as high-volume exports to Asia, which previously drove the strength in the spread, was deemed 'a bit overdone' by traders.

"LPG [is] rather expensive. The [Asian] arb has been worked and is working [though] you lose money," a naphtha trader said.

A number of European petrochemical producers are able to switch between naphtha and liquefied petroleum gas (LPG).

($1 = €0.74)

By: Cuckoo James
+44 (0) 208 652 3214

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