CPC Blend differentials to Dated Brent have fallen off sharply this week as the European naphtha market has dropped, prompting buying interest for cargoes in the first 10 days of February to wane.
On Wednesday, Platts assessed Aframax cargoes of CPC Blend, basis CIF Augusta, at a premium of 20 cents/b to Dated Brent, down 25 cents from Tuesday.
In the Platts Market on Close assessment process, a Vitol offer for an 85,000 mt CPC Blend cargo, loading February 15-19 CIF basis Augusta was left outstanding at the 16:30 London close at Dated Brent plus 25 cents/b.
The CIF Augusta CPC Blend Aframax market has fallen rapidly over the last week, shedding nearly 80 cents/b since January 19, and 50 cents/b since Friday.
"The fact that [Greece's Hellenic tender last week] was covered with two cargoes from January was bearish, and sellers wound up stuck with some earlier cargoes," a crude trader said. "Plus naphtha has stopped a lot...once those prompt buyers disappear, you either have to start deeming your B/L or sell at a discount to clear the prompt."
Naphtha, which has long been one of the primary drivers of refinery margins in Europe, has pushed sharply lower in Europe over the last week, which in turn has affected end-user interest in naphtha-rich crudes like CPC Blend.
On Wednesday, the front-month CIF Northwest naphtha crack swap -- which measures the relative strength of a product versus the cost of crude input -- slipped to a two-and-a-half month low of minus $1.05/b on Wednesday, down from minus 95 cents/b Tuesday.
Market sentiment in Europe has been weighed down by expectations of a longer regional naphtha market and a closed arbitrage to Asia, the primary destination for most European-produced naphtha.
Traders said that between Monday and Tuesday, several CPC Blend cargoes loading in the first 10 days of February sold between at premiums of between 20 cents/b and 35 cents/b to Dated Brent, down from the trades of plus 55 cents/b and plus 65 cents/b seen late last week.
"I think that there was a mild panic on CPC [in January]," a crude trader said. "People weren't even really looking at the differentials as the light end cracks roofed. But that has given some ground back and the whole market has readjusted accordingly...The market has turned from being generally short in January."
Market sources said most of the second-half of the February loading program remains available, with a revised schedule that could see additional volume added to the program expected to be released early next week.
