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Naphtha cracks firm $2/b on week as outright price stays high: trade

https://www.chemnet.com   Apr 27,2011 Platts
European front-month naphtha crack spreads have firmed by $2/barrel in the past week on the back of a strong outright naphtha price and a still narrow east/west spread, according to trading sources Tuesday.

The front-month crack spread -- the relative value of a product to crude oil -- was at minus $3.30/b Tuesday morning from minus $5.30/b a week ago.

The outright naphtha price was at $1,076.75/mt Thursday hovering close to 33-month highs.

ICE Brent futures strengthened Tuesday hitting a price of $123.88/b. "Crude has moved up, gasoline is strong and the East is well bid," said one trader.

The East/West spread was reported around $2/b Tuesday. "Nobody seems to have an explanation today, for the stronger crude price," said another source.

"Cracks becoming stronger could also be due to a stronger eastern market, certainly sentiment is still strong in NWE with sellers looking for high premiums," said one source. "So far it's a thin market today, but in theory sellers looking for premiums in the +14 to +16 range."

The backwardation between May and June naphtha prices currently stands at $12.50/mt, while premiums to forward values remain high, according to traders.

"The backwardation is [a] function of the tight prompt physical market, so as long as the tightness continues, the backwardation will roll forward," said one source.

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