Physical premiums for open spec naphtha have been falling in Northwest Europe as the market lengthened amid a closed arbitrage to Asia and potentially slower gasoline blending demand, as per sources in Platts. Spot cargoes of open spec naphtha now command a premium of US$6-8/mt over the balance month swap, down from US$8-12/mt a week ago, according to market participants.
"The prompt NWE market still feels balanced, but more naphtha is coming on offer which points to a weaker market going forward," a trader said. "The outlook for the European naphtha market looks a bit weaker as the Med is getting longer. There are at least four or five naphtha cargoes coming from the US Gulf Coast before mid-June and the gasoline blending demand might be slowing down," said a broker. While the July mogas/naphtha spread -- the premium of the front-month Eurobob gasoline swap to the equivalent CIF NWE naphtha swap -- was pegged Wednesday at US$79.50-80/mt versus US$80/mt at the market close Tuesday, industry sources said gasoline blending demand, while potentially slower, was still supporting the European naphtha market. Conversely, a weak Asian market and a narrow front-month east/west spread -- the relative value of CFR Japan cargoes against CIF Northwest European cargoes, and heard trading at US$13.50/mt Wednesday -- were pressuring the European naphtha market. In particular, naphtha cargoes originally due to leave Europe for Asia were reportedly being offered in the Mediterranean.
"The arbitrage to Asia is closed and more cargoes are thus offered in the Med where they stay at the moment," said a naphtha trader. "We do not yet see naphtha from the Med being offered in NWE, but this Med to NWE arbitrage could open and lengthen the market in the north," said another trader. The CIF Northwest Europe Naphtha cargo value was assessed Tuesday at a physical premium over the balance-month swap of US$7.75/mt, down from US$12.75/mt Monday, Platts data showed.
05-Jun-14 
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