Europe naphtha exports to Asia drop 91% on closed arbitrage window

LONDON (ICIS)–European exports to Asia have fallen by 91% from a peak last week as the arbitrage window is closed because of high freight rates and a narrow east-west spread, industry sources said on Friday.

Moreover, tightening naphtha supply in Europe because of recent high-volume exports has meant fewer volumes are now available for Asian exports, a naphtha trader said.

“Yeah, the arb isn’t looking great still, but most bbls [barrels] seem to be locked up in Dec so not great amounts left in Europe to go east,” the trader said.

Only one naphtha shipment was booked this week from Europe to Asia compared with twelve last week, according to shipping sources, with the volumes dropping from 940,000 tonnes last week to 80,000 tonnes this week.

Naphtha exports from Europe to Asia in tonnes

A second naphtha trader said: “The freight went up a lot this week… 2.8m USD from the Mediterranean to the East… before it was like 2.3m USD.”

Meanwhile, the December price spread between Europe and Asia stood at $13/tonne on Monday. The spread was narrower at $11.50/tonne on Friday for January 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 window to open east.

Twelve naphtha shipping fixtures published last week revealed 940,000 tonnes were due to be transported from Norway, the UK continental shelf, the Baltic region and the Mediterranean to Asia on vessels due to load in late November and early December.

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 = €0.73)