US shuns European naphtha imports despite approaching summer driving season

24-Mar-12

In a case of rare reverse arbitrage, higher priced Northwest European naphtha has attracted fresh US barrels, as the US shuns European imports despite the approaching summer driving season, as per Platts. The movement of USGC cargoes into Europe is a rare occurrence as Europe is typically long naphtha. For the past two months, the premium of CIF NWE light naphtha cargo to US CIF Houston light naphtha cargo has been historically high, touching a record high of US$113.26/mt on February 22. The latest cargoes heard fixed for Europe, two LR1 cargoes (45,000-79,999-dwt) loading from the US Gulf Coast in mid-March, are transporting light paraffinic naphtha, specifically a Mexican "Cactus" grade. The last confirmed imports were two US Gulf Coast cargoes chartered by Glencore, which entered Europe two weeks ago. "The NWE naphtha market is pricing to restrict arbitrage movement outside Europe and encourage cargoes to move into Europe," a trader said. Outright CIF NWE naphtha price continues to gain on the month since averaging US$1026/mt in February. Moving into March the monthly average is seen at US$1073.72/mt, Platts data show. Talk of US cargoes coming to Europe seems to have an unsettling effect on the market.