Poor demand pulls down NWE naphtha front-month crack swap falls to three-month lows

24-Apr-12

At the end of last week, CIF Northwest Europe May naphtha crack swap fell by US$0.80 to minus US$6.35/barrel, from Thursday's close, due to poor demand. This is more than three-month low, as per Platts, since January 16 when it was printed at minus $7.10/b, Platts data show. Monday morning, the May crack swap remained under downward pressure, pegged at minus $6.40/b. Over the past week, the May crack has fallen by almost two dollars on diminishing demand from Europe and key export markets.Demand centers in Europe are currently on the sidelines, with one trader pointing Monday to "full-scale LPG [naphtha's competitive feedstock in the petrochemical sector] cracking and the loss of gasoline blending." Currently, petrochemicals are concentrating on LPG, sources said, with naphtha priced at a premium of over US$100/mt to propane on Friday's close for the third consecutive day. Naphtha cracks are also falling as arbitrages to Asia and the US remain closed, but the trading source said the market would "resolve itself" as arbitrage opportunities opened up outside the region.