The front-month CIF Northwest Europe naphtha crack swap rose Wednesday to a five-week high of minus $4.55/barrel from minus $4.90/b Tuesday, as most of the prompt cargoes were sold and sentiment turned more bullish, trading sources said Thursday.
The last time the front-month naphtha crack swap was as high or higher was July 27, when it was assessed at minus $4.50/b, Platts data shows.
At noon London time Thursday, the October naphtha crack swap was heard trading at minus $4.25/barrel, while the front-month east/west spread -- the premium of CFR Japan naphtha cargo swaps over the CIF NWE naphtha cargo swap -- was pegged at $24.25/mt, down from $25.50/mt Wednesday.
"I think Europe is feeling less long due to high arbitrage volumes out of the region, but the east has to be able to survive with these huge arbs for Europe to remain OK," a trader said.
"There are no prompt cargoes like before but I still think demand outside of gasoline blending is pretty weak and cargoes that were bought in the Platts window are being offered back out without interest right now," he added.
According to another trader, the NWE naphtha market looks balanced now.
"Freight for long-range tankers looks softer now, and West African demand is also kicking in," he said.
Among the latest naphtha fixtures, the Ratna Namrata was heard on subjects to load a 80,000 mt cargo around September 15 from Malta to Japan for a $2.75 million lumpsum, while the Holy Victoria was reported on subjects to load a 55,000 mt cargo around September 22 from the Russian Black Sea port of Tuapse to Japan for a $2.1 million lumpsum.
One week ago, freight for LR2 loaded with a 80,000 mt cargo was still pegged around $3 million for the Med-Japan route.
"Right now the European naphtha market looks less long, on paper there is no contango, but there is still little demand and the arbitrage to Asia does not look that good despite freight coming off," a another industry source said. "Asian market participants do not seem too keen on getting more naphtha."
