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East-West Naphtha Economics Becoming Unworkable: Argus

OIL PRODUCTS

The arbitrage economics for Europe-East of Suez naphtha flows are likely to become unworkable in the near-term, according to Argus.

  • Argus assessed the East-West spread for March at a four-month narrow level of $11/mt.
  • European is seeing robust demand amid gasoline blending and petrochemical cracking demand. Blending demand should rise further towards as summer approaches.
  • Meanwhile, refineries including the UAE’s 417k b/d Ruwais, Aramco’s Ras Tanura, and Qatar’s state-owned QE are likely to ramp-up of naphtha supplies after completing maintenance.
  • The arbitrage economics had already been strained by the disruptions to shipping routes through the Red Sea.
  • Demand for petrochemicals has also been slowing in APAC amid a switch to LPG. This happens when LPG is at a $50/mt or greater discount to naphtha.
  • The shuttered arbitrage comes despite only 673k mt of Russian naphtha arrived in APAC in Feb compared to 1.05m mt in Jan.
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