There has been good strength in both Asian and European naphtha markets over the fortnight. A reported ethylene force majeure in Moerdijk, along with strong fundamentals and short covering, led to a bullish naphtha market. Tight supply, strong polymer margins, and US C5 demand further influenced the market, with spreads narrowing. Petrochemical demand has remained fairly strong in Europe, and weak crude oil has strengthened the bidding for flat price in MOPJ. Lots of the strength in MOPJ was due to strong covering flows and we saw MOC bid, initially.
There has been strong trade house selling in the Sep’24 NWE naphtha crack as a peak of -$5.00/bbl was reached by 5 Aug before the naphtha complex softened internationally and there has been some offering in the physical window. Spreads remained well bid in Europe, although they were less liquid in Asia.
The E/W failed to hold onto its gains as trade houses added a large number of shorts, weakening the international freight complex and pushing down TC5. The MOPJ spreads were less liquid, although strong bidding in the MOPJ flat price supported them, as they remained strong, at $6.50/mt on 12 Aug.
Higher prices with clear initial fundamental drivers (although this does not mean they have not become dislocated) helped there be a strong OI increase across the regions and down the curve with significant increases in Q1’25 in most contracts, and NWE naphtha seeing some of the few fortnightly decreases.
There fails to be an extremely strong correlation between the contracts, as WTI has lost its decent medium negative correlation with the naphtha products and gasnaph has become far better correlated with Dubai crude.
Asian and European Q4’24 refinery margins declined after an early August rise, driven by crude weakness, with strong selling in NWE Q4’24 cracks and illiquidity in MOPJ cracks.
