North Sea propane/naphtha price spread narrows on lack of offers

10-Jul-13

The CIF price spread between naphtha and less expensive North Sea propane has narrowed on a lack of offers, according to industry sources, as per Platts. Over the summer, the petrochemicals sector in Northwest Europe uses significant quantities of North Sea propane as an alternative feedstock, with the delivered price for propane at a discount to the delivered naphtha price. Dow Chemicals, Borealis, BASF and Sabic all have been using propane as a feedstock over the last few months. Based on Platts data, the CIF propane/CIF naphtha price spread was US$74/mt in early July, but since then the spread has narrowed to reach a last published level of US$50/mt Monday. Although there have been few signs of any additional buying interest from the petrochemicals sector, industry sources said that there are some trader shorts that need to be covered. Despite public bids to cover shorts, there has been a lack of offers, leaving the market for July looking rather tight. "It is at least balanced, possibly a bit short at the front," one trader said. This situation has been further exacerbated by a scarcity of imports into Northwest Europe, with no cargoes expected to arrive over the balance of July.