Robust naphtha market in Europe and recent tight conditions are still expected to persist during the coming weeks, as per ICIS. The dry run in the market is expected to last for March at least.
The strength can be attributed to premiums holding at record highs, recovering propane and gasoline that is holding firm. In contrast to usual seasonal patterns, propane has been priced far below naphtha for most of the winter, rendering the former the first choice for petrochemical buyers. On Friday, a liquefied petroleum gas (LPG) market participant said that 150,000 tons of propane was cracked in January. Normally at that time of year, none would be, with LPG normally in demand as heating fuel. However, this does not mean that naphtha is ruled out of the cracking pool.
As per a producer, “Petchem runs should be stable going forward here.” While buyers are choosing propane where possible, they still require base volumes of naphtha. However, propane prices are volatile, with pockets of tightness in the market temporarily boosting values.
On Wednesday, the propane-naphtha spread stood at US$118/ton (€89/ton), but by Thursday this had narrowed to US$95/ton as propane values climbed in response to healthy petrochemical demand. By Friday, the spread had widened again, to around US$125/ton.