Eastbound arbitrage fuels naphtha resilience despite post-ceasefire weakness

Commentary summary:

• West-to-East arbitrage remains wide open, supported by weaker EU FOB prices and strong E/W spreads.

• The European market tries to avoid contango, supported by strong arbitrage economics.

• Gas-nap is likely to resume its upward trajectory.

• Pro-nap in Asia trades well above seasonal averages, encouraging naphtha intake at flexible crackers.

The naphtha market has been very weak recently, especially in Europe, but the West-to-East arbitrage is wide open at current values. Is this just a temporary correction, or are we starting to see signs that Asian demand could provide real support this summer?

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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