The widening price spread between propane and naphtha is due to length in the LPG market, sources said, as the October propane-naphtha is trading at minus $125/mt for October Monday.
Traders said Monday that a correction to this widening spread "will come", although there is no sign of this happening while propane remains long.
Propane and naphtha are feedstocks used in the petrochemicals industry and they can be cracked to produce olefins and ultimately plastics.
Petrochemical users can alter their use of the two products depending on cost.
Propane is currently trading some $125/mt below naphtha for the month of October.
This is a wider spread than last Monday, when propane in Amsterdam-Rotterdam-Antwerp was trading at a $77/mt discount to naphtha.
A Europe-based naphtha trader said Monday that this widening differential was "a function of LPG length", rather than any strengthening in naphtha.
In fact, naphtha values have eased Monday, although the slip in propane values has been faster, sources said.
Propane values have come under pressure due to length in ARA, but also the expectation of imports from the Persian Gulf this month, which traders said was creating bearish sentiment in the market.
Sources said the widening propane-naphtha spread should encourage selling of the spread soon, although at present this has not taken place.
"Not everybody is selling at this level," a Europe-based trader said.
A London-based trader said Monday that "a correction will come," adding that petrochemicals could enter the market soon to buy propane at these prices, which could narrow the spread.
"Certainly weaker LPG is making it a much better option for October," he said.
