Front-month European naphtha cracks soared to levels last seen in Q4 2007 – almost 36 month highs on Monday while outright cargo prices peaked to more than two year high, despite weak fundamentals in the regional market, as per Platts. The crack is reacting to the Asian market only, and there is hardly any justification for them to rise to this level given demand destruction among local end-users. Platts assessed front-month naphtha crack spreads at US$3.25/b Monday, a sixth consecutive day-on-day rise. On December 17, 2007, Platts assessed cracks at US$3.35/b. Added to the recent surge in naphtha's performance against crude was the outright price for CIF NWE cargoes, which breached US$800/mt. This was confirmed in a deal done on Monday between Gunvor and Vitol for 12,500 mt of open specification naphtha loading December 15-19 at US$804/mt.
Outright prices have not been above US$800/mt since September 2008, according to Platts data.
A combination of higher premiums in Asia and general appetite for exporting product out has attracted an armada ships carrying naphtha from Europe towards China, Taiwan and South Korea, the most recent being the Cape Tallinn which was fixed on Monday to take 55,000 mt east.
European fundamentals are still pretty weak. NWE spot steam cracker margins hit minus US$58/mt last Thursday, driven lower by the rally in European naphtha values. Spot cracker margins have not been this low since January 2010.