Benzene market tightens on naphtha supply buildup
1 month ago DieselGasoil Comments Off on Benzene market tightens on naphtha supply buildup
Naphtha-benzene spread hits two-year high
Naphtha oversupply pressuring pricing
The spread between benzene and naphtha hit a two-year high this week at $385/mt Wednesday — the widest point since December 2017.
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The spread was last seen at $353/mt Thursday, as benzene prices fell following a sudden end to prompt demand inthe market.
Generally, the spread is treated as an indicator of benzene stock levels in the market. The current spread suggests a supply tightness in the prompt end of the market.
Following a low of $92/mt between the two products in January, the spread has gradually widened through the year as supply and demand fundamentals changed for both markets.
NAPHTHA MARKET SHOWS UNSEASONAL WEAKNESS
Cracker feedstock naphtha has gone through a period of weaker-than-expected demand, causing European length to build, naphtha sources said this week.
Following the return of petrochemical crackers to the market, subsequent expected demand did not follow at a time gasoline demand and arbitrage opportunities to the east were tepid.
“Base load demand has been there but it has been so easily filled from local supply,” a naphtha trading source said, adding, “Gasoline is not eating enough of local product and we have cargoes coming from Mexico and the US [into Europe], which is not helping the situation.”
In the short term, the market is “pretty oversupplied,” the source said, with the prompt length buildup that participants have found difficult to clear.
The naphtha crack — the differential between a barrel of crude and the petroleum product that is refined from it — has been steadily declining due to thin demand for both petrochemical cracking and gasoline blending.
However, the front-month CIF NWE naphtha crack swap moved higher 15 cents/b to minus $8.60/b at the close of Thursday, compared with minus $8.10/b July 15.
The front-month CIF NWE naphtha crack swap last traded on ICE Friday afternoon at minus $8.70/b.
Meanwhile, physical CIF NWE naphtha cargoes hit a two-year low August 7 at $418.75/mt, following greater volatility as the market became more exposed to crude moves.
Prices have since improved due to a slight recovery in crude, with CIF NWE naphtha cargoes last assessed at $436.50/mt Thursday, but still hovering at lows for the year, with the 2019 average sitting at $506.10/mt.
PROMPT TIGHTNESS BOOSTS BENZENE
Downstream, European benzene began the year with heavy oversupply and few export opportunities to clear tanks.
Analysis, latest developments, challenges and trends at the light end of the barrel.
The high stock levels have gradually decreased through the year as aromatic production from cracking has lessened.
Added supply coming as a result of toluene disproportionation has also dwindled in the global market, as conversion rates stopped being economically viable due to lower demand for paraxylene.
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