NWE naphtha backwardation falls further on low end-user demand
London (Platts)--15Nov2012/926 am EST/1426 GMT
Backwardation in the European naphtha market has dropped steadily over
the last four days of trading as low end-user demand from the petrochemical
and gasoline blending sectors has caused prices and cash premiums to fall,
Platts data shows.
On Wednesday, the November CIF NWE naphtha cargo outright swap closed
European trading at a $9.25/mt premium to December, down from $11/mt on
Tuesday and $13.25/mt on Monday.
"There isn't much interest from end-users," a trading source said of the
drop in inter-month spreads. "Petrochemical producers are already looking to
keep stocks low ahead of the end-of-the-year, though there could be some
buying interest going in to December."
During early European trading on Thursday, market sources reported that
the November-December inter-month spread was heavily offered at plus
$9.50/mt, with little bidding interest.
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"We're hearing possible talk of [petrochemical] cracker run cuts, end
users are pretty high in stock already, and they don't want to buy too much
because of the year-end stock picture," a trader said, adding that while
there was still some bidding from end-users, it was at lower cash premiums
than were seen throughout October and early-November.
Naphtha, along with propane, is a key feedstock in petrochemical
crackers. It is also serves as a blendstock in gasoline.
However, traders said demand from the blending sector has been thin in
the Amsterdam-Rotterdam-Antwerp refining hub, as strong aromatics prices and
tight octane markets put pressure on blending margins.
"Gasoline itself is pretty strong in New York and in Europe," a trader
said. "But it's still difficult to pay for the higher premiums on octanes,
despite a higher differential between gasoline and naphtha."
On Wednesday, physical naphtha cargoes were valued at a $27/mt discount
to FOB Rotterdam Eurobob gasoline barges.
--Paula VanLaningham, email@example.com
--Edited by Jonathan Fox, firstname.lastname@example.org