Europe naphtha structural weakness tempered by strong demand in Asia, upstream refinery issues

Author: Ciaran Tyler


LONDON (ICIS)--European open-spec spot naphtha prices have increased this week amid a jump in a upstream crude oil values, while the product's structural weakness in the region is being tempered by strong demand in Asia.

A Russian crude oil pipeline, archive image. Source: Sovfoto/Universal Images Group/REX/Shutterstock

Naphtha Open Spec Physical FOB (free on broad) Mediterranean spot cargo prices were assessed at $571.54-576.54/tonne on 17 May.

Naphtha prices were volatile last week amid a number of planned and unplanned turnarounds at crackers downstream.

Equally, volatility was caused by an ongoing widening in the spread between alternative feedstock propane and butane costs, and naphtha.

However, the structurally weak demand has been tempered by ongoing planned refinery outages and contaminated crude issues affecting some refiners in recent weeks.

An open arbitrage window with Asia has also soaked up any surplus supply in the region.

Western naphtha arbitrage volumes for May are estimated to between 1.4m-1.5m tonnes, slightly down from April estimates of 1.6m tonnes.

Looking ahead, demand is set to pick-up in the months ahead as cracker outages finish.

Supply is likely to balance out if refinery issues continue and arbitrage flows to Asia remained unabated in June.

Liquefied petroleum gas (LPG) is likely to remain more competitively priced than open-spec naphtha and limit overall consumption at those crackers that can switch between feedstocks.

Demand for lighter grades of virgin light naphtha are likely to remain strong as the peak driving season approaches.

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Naphtha is a key petrochemical feedstock for steam crackers in the manufacture of olefins (ethylene, propylene, butadiene) and aromatics (benzene, toluene, xylene).

Focus article by Ciaran Tyler