Naphtha crack swaps in NWE fall on bearish outlook, ample supply

Naphtha crack swaps in Northwest Europe are falling as the widening Asian premium to NWE fails to offset the lack of interest from European petrochemical end-users and limited demand for gasoline blending, as per industry sources in Platts. After having fallen 90 cents Tuesday to minus US$11.25/barrel, the May CIF NWE crack was seen falling further to minus US$11.70/b, while the May/June naphtha spread was still pegged at a US$1/mt contango, after having flipped Tuesday to this contango from a backwardation of US$0.50/mt Monday. Meanwhile, the East/West front-month spread -- the premium of the Means of Platts Japan May naphtha swap to the CIF NWE May naphtha swap -- was heard rising to US$28/mt from US$27/mt Monday. "There is still plenty of oil around [in Northwest Europe], and plenty is going East," said a trader. "The question is: how long can Asia absorb such volumes? As soon as they stop buying, values will drop," said another trader. "Most of the market participants expect the market to weaken." Further, with LPG much cheaper than naphtha, the planned six-week turnaround of BASF's cracker in Antwerp, and reduced demand for petrochemical products in Europe, interest from petrochemical end-users does not seem likely to pick up in the coming weeks. In Northwest Europe, most trading has grounded to a halt, and only small parcels, small cargoes of naphtha are bought for use in gasoline blending.
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