Strong momentum in naphtha market, but is European demand pointing to a ceiling?

Commentary summary:

• The outlook for the European sector may stagnate in the short term, with reduced ethylene prices and limited gasoline arbitrage options in the Atlantic basin.

• MOPJ crack is correcting after trading above zero for part of the week, avoiding positive prompt values.

• NWE Ethylene and propylene prices have risen by over $200/mt since January, boosting petrochemical margins and naphtha prices, but we’ve already seen the first correction.

• E/W reaches 6-month lows, making arbitration to the East difficult, but market could find a bottom soon since Asian outlook has improved compared to the European one.

One more week we are talking about increases in the naphtha market, with Asian and European timespreads gaining more than $3/mt over the past week amid a gasoline market that remains very strong, especially in Singapore, and the gradual rise in petrochemical product prices.

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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