Petrochemical drag harms European demand, but arbitrage offers some support

Commentary summary:

• European naphtha correction continues, Oct/Nov prompt timespread sinks into contango.

• E/W spread remains wide, fuelling arbitrage flows from Europe to Asia.

• European ethylene prices down $150/mt since mid-august, propylene also weaker.

• Saudi Aramco cuts LPG contract prices for October, hurting naphtha competitiveness in Asia.

The correction in the European naphtha market continues for now, with the Oct/Nov prompt timespread sinking into contango as we had already seen with the Sept/Oct when it was close to expiry. The rest of the curve remains in backwardation for now, but Q4 timespreads have shown weakness in recent weeks.

Philip Jones-Lux is Senior Analyst for Sparta. Having worked with organisations such as JBC Energy and RP Global, Philip is a seasoned energy market analyst with expertise across the oil barrel and power markets

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