Naphtha arbitrage to Asia shuts down from Europe, are E/W summer contracts due for a correction?

Commentary summary:

• Naphtha physical prices corrected sharply, especially in Asia, closing the arbitrage window from Europe.

• E/W box turned negative for the first time since early May.

• North American exporters keep arbitrage routes open to Asia and Europe.

• Propane exports from the USGC to China are rising and the new deal between US and China points in this direction.

Naphtha physical prices corrected very sharply at the end of last week and the beginning of this one.

The largest drop is seen in the Asian market, where, after two weeks with the arbitrage from Europe open, the sharp decline in premiums has closed off these opportunities.

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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