17-Sep-16 Availability in the Northwest European naphtha market seems to be on the increase, as cargoes keep moving north into the region while arbitrage deliveries across the Atlantic look more difficult to make work, as per Platts. "For physical buyers, the arbitrage looks worse, not quite unworkable, but not far from it," a trading source said Wednesday.
The Platts CIF NWE cargo value was assessed at US$387.50/mt Tuesday, a US$15.50/mt fall on the day, and the fourth consecutive daily decline. Demand from gasoline blenders in the US has help pulled naphtha cargoes across the Atlantic in recent weeks, while demand in Northwest Europe has also been healthy. "Demand in Europe is still healthy, but it is not enough to place all the cargoes," the source said, adding that cargoes from the Red Sea, Mediterranean and Persian Gulf where still making their way north into Europe.
"I'm seeing blending demand lower, both in NWE and US. I'm also seeing more cargoes for October delivery, coming from the West and the Red Sea/Persian Gulf. There is potential to the downside I think," a source from one petrochemical company said.
Arbitrage deliveries to the east have closed, sources said.
October C&F Japan naphtha cargoes were trading at a US$9.25/mt premium to CIF NWE values at 1300 GMT Wednesday. "It's closed, for everything, unless you have no option," a second trading source said about the arbitrage to the east. The NWE market has been reasonably balanced in recent weeks, despite the lack of arbitrage options, and some market sources expressed optimism that cargoes could still be absorbed despite lower blending demand. "Blending demand has cooled, and Red Sea cargoes are coming this way, but material is still being absorbed," a third source said, Tuesday. The paper market continues to largely track the gasoline market, with sources saying the trans-Atlantic arbitrage on paper still looks fairly attractive. One source said that "presumably the [naphtha] paper market is just following gasoline, a stronger paper gasoline market could make the trans-Atlantic arbitrage look better than it is."
The October CIF NWE naphtha crack was trading at US$4/mt at 1300 GMT Wednesday, down 5 cents from the market close Tuesday.
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