NWE gasoline-naphtha spread rise to record highs as naphtha surges

The spread in the physical market between CIF Northwest European naphtha cargoes (assessed at US$851.50/mt)and Eurobob Amsterdam-Rotterdam gasoline barges saw another ten dollar increase to surge to US$49/mt on Monday, the widest ever in a Platts assessment. The previous highest record assessed spread was US$44/mt on January 7, 2010. The spread between the two products widened as naphtha cracks in the over-the-counter market have recently surged with physical material. As naphtha cracks rise, the physical spread between the January swap and the CIF NWE cargo assessment has been relatively calm. The rise in NWE naphtha cracks in recent days has been largely linked to a surge in cracks in the Asian naphtha markets. The NWE market is structurally long and often arbitrages material to the Asian naphtha markets. Naphtha CFR Japan on a flat price rose on Friday to US$858.75/mt, the highest it has been since finishing at US$864.75/mt on September 23, 2008. Gasoline cracks in contrast have been relatively steady with Eurobob cracks for January around US$5.25/barrel on Monday, compared with US$5.65/barrel on December 13. In the over-the-counter market the spread between the two products stood at US$37.75/mt on Monday, on December 13 the spread was US$16.75/mt. The negative spread between the two products leads to poor gasoline blending economics, reducing the levels of naphtha entering the gasoline pool. Physical Eurobob gasoline barges have fallen to a discount against front-month swaps, an unusual trend throughout the current quarter given that gasoline has demonstrated a tight market structure.
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