Kazakhstan's CPC Blend differentials to Dated Brent fell sharply this week to levels last seen mid-July 2014, due to tepid demand, lackluster light-end cracks and a long June program.
Ongoing refinery strikes in France have also hit demand for prompt cargoes, said traders. "CPC, particularly on the prompt side -- we're holding low values, and I think its also due to the French strikes," said one European crude trader.
On Thursday, Platts assessed Aframax cargoes of naphtha-rich CPC Blend, basis CIF Augusta, at a discount of $1.185 cents/b to the Mediterranean Dated strip, down 50.5 cents relative to the 13-28 day forward Dated Brent market from Wednesday, following a competitive trade in the Platts Market on Close assessment process.
A 3 cent contango structure was included in 10-25 days ahead assessment period. This is the lowest level since July 15, 2014, when it was assessed at minus $1.20/b.
On Thursday, Glencore sold a prompt 85,000 mt cargo basis CFR Augusta to Gunvor at Dated Brent minus $1.35 cents/b in the MOC process.
"Historically, CPC is low in June, due to naphtha cracks not being as good at this time of year -- but this is still a weak market," one sweet crude trader said.
"The market is very, very weak still for CPC," a second crude trader said.
The average daily loading rate for CPC in June is set to rise 121,265 b/d from May to 971,113 b/d, according to the provisional program.
Scheduled exports of the grade are set to rise by 357,450 mt from the final May program to 3.735 million mt (29,133,390 barrels) in June after two months of intermittent maintenance in the CPC Blend system saw loadings in April drop to their lowest level since the previous October.
Also affecting demand is weakening naphtha fundamentals. The front-month CIF NWE naphtha cargo crack swap reached an eight-month low on Thursday, assessed at minus $4.20/b from $3.85/b the day before, and the lowest level since September 3, 2015.
The naphtha paper market weakened over the last days on the back of softer sentiment in the gasoline market as well as a strengthening crude oil complex.
Looking at the physical market, European naphtha is generally expected to lengthen throughout June with increased Russian resupplies reaching the market from June 10 onwards.
Moreover, the spot arbitrage to Asia remained closed this week thus lengthening the European market which largely relies on Asia to clear its structural length.
"The tone of the market is largely bearish,", a European naphtha market participant said earlier this week.
