CIF Northwest European naphtha cargoes have fallen to a six-week low versus the swap after a slowing of spot buying interest and a lack of blending demand pressured cash premiums for open specification naphtha, sources said.
The CIF NWE naphtha physical cargo was assessed $11.50/mt lower at $501.50/mt Monday, to be at a $1.75/mt premium to the front-month CIF NWE naphtha swap, down from a $2.25/mt premium Friday, S&P Global Platts data showed. The spread was last lower on January 3.
The Northwest European naphtha complex had been firm since the start of the year, with a significant strengthening of physical premiums and paper market observed throughout January as demand from traders and petrochemical end-users was boosted by an increasingly uncompetitive LPG. Also, the naphtha arbitrage to Asia from the Mediterranean was seen as more workable.
Last Friday, CIF NWE naphtha cargoes were assessed at a 19-month high of $513/mt.
However, the Northwest European naphtha complex started the week on a quiet note as neither strong interest to sell nor to buy was reported, while sentiment remained supported by a firm Asian naphtha market.
"People do not seem as eager to buy naphtha as they were two weeks ago," a trader said.
According to another trader, the Asian naphtha market remained positive amid refinery issues and low arbitrage arrivals, while the Northwest European market looked quiet but balanced.
"It is pretty slow this week, but a similar situation persists in Europe: petchem demand is steady, and there are no distressed cargoes in the market," he said.
Apart from slower buying interest from petrochemical end-users, the softening of the physical market also came from a lack of blending demand for naphtha, which has been limited of late and led to blending grades of naphtha and even light virgin naphtha pricing into the petrochemical pool.
"Some [naphtha] cargoes that would have gone to gasoline blending have been bought by petchems," a third market participant said, adding LVN was trading at a premium of $5-$9/mt premium over mean of Platts CIF NWE naphtha, depending on quality.
When blending demand is healthy amid balanced supply, LVN usually trades at a premium of around $15/mt over the mean of Platts CIF NWE naphtha.
