The outlook for the European naphtha market remains bleak, with few, if any, changes expected for 2013, as per ICIS. A combination of adverse macroeconomic conditions, structural length and lacklustre requirements for the product are likely to continue to weigh on the market. 2012 has seen consistently negative crack spread, frequent oversupply and subdued demand.
Naphtha pricing forecasts - largely dependent on crude oil values, which participants deem near-impossible to predict - are difficult. In terms of market conditions next year, with the European naphtha market structurally long and increasingly dependent on arbitrage opportunities to Asia, much will hinge on how the product performs in the east. Arbitrage opportunities this year have been few and far between, particularly during the second half of 2012.
Asia is a buyer of naphtha. However, the east-west spread is currently negative [meaning that the arbitrage east is firmly closed for most grades]. It is often the case that, with Europe’s oversupply building, volumes are sent to Asia even if it is not financially viable to do so.