A combination of high crude oil prices driven up by ongoing violence in Libya and a firmer crack spread supported by tight supplies pushed European naphtha prices to US$1006-1014/ton as per ICIS. Crack spread firmed to -US$2.65/bbl. Firming crack spread throughout the week amid rises in the price of crude oil, sent the cargo range upwards.
This was in contrast to the trend of the previous two weeks, when the crack spread had weakened in response to crude oil price hikes. The softening of the spread helped curb what would have been higher naphtha price rises, with the aim of lessening damage to demand.
However, this week a tightening of the market had negated the need for this, resulting in a stronger crack spread. This market tightness resulted from four main factors:
Political unrest in North Africa and the Middle East leading to increased demand for spot naphtha,
March contract prices for ethylene and propylene settled up on the 28 February, increasing the incentive for the petrochemical industry to crack naphtha;
Improved demand for naphtha from US gasoline blenders
The strengthening of demand coincided with naphtha supply being partially restricted by refinery turnarounds.