NWE naphtha cracks strengthen as availability levels drop

06-Nov-13

Naphtha crack spreads in Northwest Europe strengthened for both balance-month and front-month supplies, as the market reacted to a more balanced picture from higher recent levels of availability, as per trading sources in Platts. The November crack spread -- measuring the relative value of the product to the crude from which it is made -- rose Monday to minus US$4.12/barrel, the strongest balance-month level since February 15, when it was assessed by Platts at minus US$4.05/b. Meanwhile, the December crack increased Monday to minus US$5.43/b, the highest front-month level since September 16. Industry sources attributed the rapid rise in the naphtha paper structure to a combination of an open arbitrage from Europe to Asia and to a stronger propane market, which could potentially encourage petrochemical end-users to crack more of rival feedstock naphtha. Cracks have risen so sharply because of the strength of the Eastern market which is pulling naphtha from Europe, while in recent months cargoes have only been pushed East [by the lack of outlets in Europe]," said a market participant. "The other reason is the strengthening of propane which is shifting the focus back to naphtha for the petchem end-users." "We have not yet seen any petchems switching to cracking more naphtha, but if propane strength persists for a week or so, then we could see it," said one naphtha trader.