Can the naphtha market recover from early-year losses?

Commentary Summary:

– The market saw a strong upward trend in December, followed by a sharp correction in early 2025.

– The West-to-East arbitrage closure at the end of 2024 foreshadowed the early-year correction.

– Physical premiums remain stable, consolidating gains seen in December.

– Russian product flows to Asia hit a seven-month high in December, contributing to the market correction.

Over the past few weeks, we have observed a highly volatile naphtha market, particularly regarding timespreads in the European and Asian markets.

The strong upward trend seen in the second half of December was followed by a sharp correction during the first sessions of the year, foreshadowed by the closure of the West-to-East arbitrage since the last sessions of 2024.

While Feb cracks are trading slightly below year-end levels, timespread curves have undergone a sharp downward correction of >$3/mt in Feb/March values for both markets.

Jorge Molinero is a Commodity Owner at Sparta. Starting his career as a financial analyst with BBVA, Jorge quickly transitioned to market intelligence within the energy sector, spending 4 years as a naphtha analyst with Repsol before joining Sparta in early 2023.

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