Asia arbitrage holds Europe naphtha market up, gasoline demand wavers

26 March 2014 13:29 Source:ICIS News

LONDON (ICIS)--The European naphtha market is being supported by Asian petrochemicals demand, while US gasoline buying appetite has fallen from its peak two weeks ago, industry sources said on Wednesday.

A naphtha trader said: "It [Asian arbitrage] works out of the Med." A second trader also acknowledged the arbitrage window was open from the Mediterranean, but confirmed that the window was closed from northwest Europe.

"It is closed from the north as the east-west spread is weak," the second trader said.

New shipping fixtures revealed two vessels were booked to export 160,000 tonnes of naphtha from the Mediterranean to Japan, a key destination for European exports.

Meanwhile, traders are not as optimistic about demand for naphtha from the US gasoline sector as they were a couple of weeks ago.

On the afternoon of Tuesday 25 March, Eurobob gasoline sales during open platform trading picked up on the back of a switch from winter-grade to summer-grade gasoline.

Naphtha demand from the gasoline sector picked up simultaneously, the first trader said. However, the buying appetite was short-lived and has dropped off, it added.

"Some naphtha into gasoline did trade yesterday, but demand is certainly lower than it was two weeks ago," the first trader said.

Meanwhile, the European naphtha differential over ICE Brent crude oil futures fell from $5.40/bbl on Monday 24 March to $6.00/bbl Tuesday 25 March, pressured by a fall in gasoline margins in Europe.

The first trader said: "[It is] lower on lower gasoline cracks."

By Cuckoo James