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Spot NWE benzene higher as August naphtha spread hits $200/mt

https://www.chemnet.com   Jul 18,2011 Platts
Spot Northwest European benzene prices strengthen further Friday morning, with further evidence of a widening spread between upstream naphtha and the aromatic.

An August trade was reported done at $1,175/mt for a 1,000 mt CIF ARA barge late Thursday, and during the morning spot prices for July were seen at a bid/offer range of $1,160-1,175/mt for 1,000 mt CIF ARA barges while August moved up to $1,165-1,190/mt.

This compared to a closing Platts July 14 assessment of $1,160/mt for July and $1,170/mt for August.

The increase also closed the previously open arbitrage between Europe and the US. The FOB US Gulf Coast was assessed at 399 cents/gallon ($1,193/mt) for July and 400 cents/gallon for August, with freight for an export cargo to the US reported to be between $40-45/mt.

The current August bid level compared to a European open-spec August naphtha value of around $970/mt CIF NWE. This gave a minimum spread of $195/mt for August, although the late Thursday trade of $1,175/mt suggested that the spread was now above $200/mt, the level considered a break even point for European production economics.

Platts data shows that the spread dropped below $200/mt May 31 and -- aside from a two day period in late June -- has remained below that level through June and July to date.

According to one industry source, prices could continue to climb. The source said that despite consistent reports of a supply overhang in Europe, the market was actually tighter than some people believed.

"There is not that much material around. There's maybe one or two sellers at the moment. But if you wanted 10,000 mt, you wouldn't get it," the source said.

"I think it can go close to $1,200/mt today," he added.

But other sources dismissed this view, arguing that the European market was still fundamentally long.

One consumer said: "The market is not tight and it is not bullish. It's been driven up by energy over the last week, but there is plenty of product around. Demand is weaker everywhere."

A trader supported this view: "Trade is long as hell. If you buy something, you get a nomination to deliver immediately."

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