Naphtha paper market robust despite weak fundamentals

The European naphtha paper market is seeing some support despite a weakness in physical demand, according to Platts.

• The M1/M2 spread reached its highest since late May on Aug. 24 at $7.75/mt, while Platts assessment of the naphtha crack hit its highest since June 2 at minus $10.35/b
• Upside support is likely coming from tight supply in both Europe and Asia, driven by falling exports from Russia.
• Russian naphtha exports are expected to decline for the third consecutive month in August. These volumes primarily serve the Asian market.
• European demand is notably weak due to extremely low petrochemical demand, with cheaper propane the feedstock of choice among petchem producers.
• Propane prices are expected to remain low even into winter, which could keep naphtha demand depressed.
• However, improved gasoline blending activity is partially offsetting the poor petrochemical demand.