Market and product
Naphtha drops below $400/mt, European cracker margins increase
European naphtha was assessed at $389.50/mt CIF NWE Monday, pushing European spot cracker margins to $666/mt, close to all-time highs.
Naphtha prices are at their lowest point in nearly six years. The last time the CIF NWE naphtha cargo was assessed lower was in the midst of the global financial crisis on March 16, 2009, when it was assessed at $380.25/mt, according to Platts data.
While trading activity in the naphtha market resumed Monday, with most market participants back from Christmas holidays and at least a few barges exchanging hands, the paper market was little changed from the very weak levels of the previous week.
"The naphtha market still feels a bit long and with the contango it's quite hard to incentivize people to get naphtha out of tanks unless there is a good premium," a broker said Monday.
Naphtha has been pulled lower by plunging oil prices. Crude futures tumbled more than 5% Monday after Saudi Aramco slashed the official selling prices of its February-loading barrels to European customers in a bid to secure market share amid a global supply glut. Dated Brent was assessed at $51.3/b, its lowest assessment in nearly six years.
Cracker margins have swelled because the fall in olefins prices has been far less dramatic than the decline in naphtha. Ethylene, propylene and butadiene spot prices were assessed Monday at Eur774/mt ($921/mt) FD NWE, Eur802/mt FD NWE and Eur600/mt FD NWE respectively.
These prices represent a five-year low, a two-and-half-year low and a one year, four-month low for ethylene, propylene and butadiene respectively.
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