20-Feb-17 Many European petrochemical end-users are expected to resume cracking propane in March and crack more butane as both gases' prices are likely to weaken relative to naphtha due to the end of winter season, market sources said this week, as per Platts.
"For March, I think the naphtha market is getting weaker due to crackers' turnarounds in Europe and propane is likely to go back into the cracking pool," an end-user said.
Propane physical cargo prices in Northwest Europe climbed to a 3 year high vs physical naphtha cargoes on February 1 as bullish data on US-wide propane and propylene inventories boosted the propane CIF ARA swap and refrigerated cargo values, while the NWE naphtha market remained stable on steady fundamentals.
Looking forward, however, the discount of the front-month CIF ARA propane swap to the equivalent CIF NWE naphtha swap widened to US$65.50/mt Thursday from US$65/mt Wednesday. This equates to the front-month CIF ARA propane swap being valued at 86.7% of the respective naphtha swap, down from a value around the 90%-mark throughout H2-January.
A softening Asian propane market, due to the end of the winter season and turnarounds at Chinese propane dehydrogenation plants, should lead to more spot propane flowing from the US Gulf Coast into Northwest Europe. "Petchems still crack naphtha in February, but will go back to propane in March," a naphtha trader said.
Butane is also likely to increasingly enter the cracking feedstock slate throughout March. As the winter season comes to an end butane spot availability ex-refineries in Northwest Europe should improve, as refineries use less tons for blending of winter specification gasoline. Winter specification gasoline has less restrictive Reid Vapor Pressure constraints than summer specification product and thus allows more blending of the relatively cheap, but RVP-intense, octane-booster butane.
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