January swings set the stage for market rally

Commentary summary:

• Naphtha prices surged last week, with timespreads and cracks exceeding historical seasonal averages in Asia, Europe, and the US.

• Steam cracker margins improved due to robust ethylene and propylene prices, boosting naphtha demand, especially in the West.

• Despite rising Asian cash differentials, arbitrage from the West worsened due to a lower E/W spread and higher Western premiums.

• Improved European prices opened arbitrage for USGC light sour C5, supporting a tighter US market that also saw price increases.

Last week, naphtha exhibited a strong uptrend, pushing timespreads and cracks above historical seasonal averages in both Asian and European markets.

Light sweet and sour physical premiums also surged significantly in the USGC and NYH, tightening the overall naphtha market landscape.

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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