Declining physical premiums keep pointing to a soft naphtha outlook

Commentary summary:

• Asian timespreads curve shows upward trend down the curve despite hitting contango in the prompt.
• E/W spread widened above $20/mt for the December contract, reverting last month downtrend.
• Physical premiums continue to decline in Asia and Europe, nearing negative levels in some regions.
• PADD 1 gasoline inventories in the US have dropped to three-year lows, potentially increasing import needs from Europe if local refinery runs fail to recover.

The naphtha market stabilises after the sharp correction accumulated since early November, led by an Asian market where the timespreads curve has traded higher in recent sessions, despite a big drop in the prompt. E/W spread has also widened, re-establishing itself above $20/mt for the December contract.

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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