German naphtha demand in 2011 above five-year moving average

German demand for naphtha in 2011 has been consistently above the moving average for the past five years, an International Energy Agency reported, as per Platts. The five year moving averages for January to May 2011 were within a 365,000-440,000 bpd range, whereas monthly demand for naphtha into Germany between January and May this year has not fallen below 450,000 bpd. The report also shows that naphtha demand in Germany rose to just under 490,000 bpd for May 2011, up some 100,000 bpd from the same time in 2010, when demand was at 390,000 bpd. Demand growth was robust in naphtha amid strong industrial production. The increased demand for naphtha contrasts with the trend seen among other oil products. Overall, European oil product demand in Europe was "essentially unchanged" in May vs 2010, with the increase in naphtha demand offsetting the decline in demand seen in heating oil and gasoline. At the start of 2011, German industrial figures were robust, with year-on-year production growth at 11.4% in January 2011, rising to 13.8% in February, according to a Eurostat report. But growth slowed in Q2 to 7.5%, Eurostat figures show. One reason for the increased buying of naphtha was the relative strength of propane at the end of 2010, which encouraged end-user buying for naphtha rather than LPG. Propane and naphtha are both feedstocks used in the petrochemicals industry and either can be run through a cracker to make olefins such as ethylene and propylene. Petrochemical users will choose to run either propane or naphtha dependent on which product is cheaper to use as a feedstock. The propane-naphtha spread reached its widest for 13 years on December 2, 2010, with North Sea propane cargoes pricing $192/mt above naphtha cargoes CIF Northwest Europe. The last time propane was pricing this high relative to naphtha was on January 22, 1997, according to Platts data. As a result, naphtha was a more economically attractive feedstock for German buyers during the fourth quarter of 2010. The propane-naphtha spread has since fallen into negative territory, as propane imports into Europe are expected to increase. As a result, North Sea propane is currently trading around US$90/mt below naphtha cargoes.
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