Soft demand caused by a combination of high prices, fears for the economy and increased competition from other products is expected to keep European naphtha market activity levels subdued during the first few months of 2012.
Following a difficult 2011, the consensus is that little is likely to change in the coming months.
Increased crude oil values are expected to continue to exert upward pressure on naphtha prices. In turn, arbitrage opportunities to Asia are likely to remain limited because of high European naphtha prices.
Meanwhile, concerns over the economy continue to impact on demand for petrochemical end-products, and hence feedstock requirements.
While prices for rival feedstock propane finally overtook those of naphtha early in 2012, giving naphtha the advantage, it is not certain how long this situation will persist, due to the structural length of the propane market.
Changes in the US refined product markets are also likely to impact on European naphtha. A growing preference for shale gas will likely mean reduced US petrochemical requirements for naphtha.
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