Has the market gone too far?

Commentary summary:

• The bearish trends in E/W and Gas-Nap could moderate soon, with fundamentals stabilizing in the medium term.

• Recent sessions show signs of cooling, with European ethylene prices correcting by $60/mt after a $200/mt surge.

• Blending economics in Europe have improved recently as component premiums declined, reopening arbitrage opportunities.

• Elevated physical premiums in NWE andd strong timespreads in Europe ($16/mt) and MOPJ ($13/mt) suggest market overheating risks.

After IE Week, numerous questions are on the horizon for the naphtha market. We have confirmed that doubts about the current upward trend in naphtha timespreads persist, along with debates surrounding the recent declines in the E/W and Gas-Nap.

In this week’s commentary, we will highlight the main drivers behind these trends and attempt to summarize the market sentiment we gathered from numerous conversations in London.

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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