Market and product
Europe naphtha falls $43/tonne on lower crude values
LONDON (ICIS)--The outlook for European naphtha demand is optimistic after lower crude oil values caused naphtha prices to fall by $43/tonne (€30/tonne) on Friday morning, sources said.
At 10:00 GMT, the naphtha range was assessed at $951–959/tonne CIF (cost, insurance & freight) NWE (northwest Europe). June Brent crude oil was at $108.51/bbl.
This compared with a range of $994–1,002/tonne CIF NWE the previous afternoon, when June Brent was at $114.31/bbl.
The latest range is the lowest seen for European naphtha since 17 March, when prices were assessed at $946–954/tonne CIF NWE.
Crude oil price hikes caused by concerns about the ongoing political turmoil in North Africa and the Middle East disrupting supplies drove naphtha prices up and supported them for several weeks.
Naphtha hit a 33-month high of $1,054–1,062/tonne CIF NWE on 8 April, and prices continued to rise further, peaking at $1,096–1,104/tonne CIF NWE on 28 April.
This led to concerns about the negative effect on demand for European naphtha.
“It’s too expensive for most end-users, they’re not willing to pay up,” one source said on 20 April.
A week later, a trader said: “These high prices are causing demand destruction.”
Following news that Osama Bin Laden had been killed by US forces in Pakistan, Brent crude oil prices fell by $2.41/bbl to $123.48/bbl by noon on 2 May.
Crude prices have fallen further since then, driven by a combination of astronger US dollar and concerns about the US economy and high prices disrupting demand.
A slide of naphtha prices to $1,062–1,070/tonne CIF NWE on the morning of 4 May was said to be insufficient to rejuvenate naphtha demand.
However on Friday, further price decreases have left the European naphtha market optimistic.
“This will rejuvenate demand for naphtha,” a trader said. “Asia and Brazil will come back big-time.”
A producer said: “Crude has fallen, naphtha has fallen, so demand will come back from the US. More naphtha will leave Europe.”
Sources agreed the outlook for European naphtha was positive.
At 10:35 GMT, June Brent was trading at $109.25/bbl.
Meanwhile, European benzene prices were moving back down below $1,300/tonne, although a weak dollar tempered some of the downward movement. However, the extent of the drop in crude and naphtha values means there is still room for the market to come off further.
In the toluene market, offer levels are moving further apart. The drop in crude and energy futures pushed buy indications down to $1,100/tonne. However, a tight-to-balanced supply and the potential for exports to the US kept offers relatively steady.
European markets showed mixed reactions to the fall in crude. At 12:40 local time, the FTSE 100 had fallen by 0.35%, the German DAX was up by 0.53%, while the French stock market index, CAC 40, had risen 0.18%.Asian markets closed lower today with the Nikkei dropping down by 1.45% from the previous close, while Hong Kong’s Hang Seng is down 0.44% and China’s Shanghai Composite fell by 0.30%.
