Persian Gulf naphtha flowing to Northwest Europe as arbitrage on East closes

26-Aug-16

Cargoes of naphtha from the Persian Gulf and the Red Sea have been making inroads into NW Europe after a closed arbitrage on the traditional route to Asia has forced traders to look elsewhere, sources said in Platts.
Glencore said recently it had two Long Range 1 tankers -- the Theodesia and the Lilac Victoria -- headed to Northwest Europe, one out of the Red Sea and one out of the Persian Gulf. A trader said half the cargo on the Lilac Victoria had been sold to a petrochemical end-user, with the other half still available.

"There have been at least three or four [vessels] fixed on that route recently," a second trading source said. BP, also said to have been looking at using the arbitrage, was not available for comment. Not all sources thought the arbitrage made sense. "I doubt it can be profitable to take naphtha from Rabigh to NWE, most likely they have to lift and, in that case, this is currently the best netback," a trader said. The traditional naphtha arbitrage east has been closed for much of the year amid increased production in the region and also out of India, combined with cracker maintenance.