Cargoes of naphtha from the Persian Gulf and the Red Sea have been finding their way into Europe after a closed arbitrage on the traditional route to Asia has forced traders to look elsewhere, sources said.
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 Platts Arab Gulf naphtha assessment was $373.20/mt Tuesday, while the CIF NWE cargo assessment was $397.50/mt and the CFR Japan cargo assessment $399/mt, S&P Global Platts data showed.
The September naphtha east/west spread -- the premium of CFR Japan naphtha cargo swaps over the CIF NWE naphtha cargo swap -- was trading at $11 on the Intercontinental Exchange, Tuesday.
LR1 clean freight rates from the Red Sea to Japan, basis 55,000 mt, were assessed Tuesday at Worldscale 107, or $22.41/mt.
LR1 clean freight rates from the Red Sea to UK Continent basis 65,000 mt were assessed at a $1.4 million lump sum Tuesday, or $21.54/mt.
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.
