Light ends suffer as trade war escalates and the arbitrage opportunities disappear

Commentary summary:

• The correction in Asian cash diffs has shut LR2 arbitrage from the MED, previously profitable through the end of Q1.

• Prompt timespreads have rebounded, removing short-term contango, but the back of the curve remains weak.

• China raised tariffs on US LPG imports from 34% to 84%, effective today, disrupting global trade flows.

• European blending remains resilient, supported by open RBOB arb, and firm Eurobob blending, heavy naphtha and LVN premiums may continue to rise.

The naphtha market saw a sharp correction last week amid an international landscape heavily affected by tariffs and a weakening macroeconomic backdrop, which is hitting the petrochemical industry hard—particularly China, its main growth driver.

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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