Naphtha outlook remains bullish and the new US blockade could add fuel to LPG market
‘- The US naval blockade of Iranian ports came into effect on April 13 at 10am EDT, targeting vessels entering or leaving Iranian ports. It remains to be seen whether the measure will work and further reduce volumes flowing out of the AG, but the risk to naphtha and LPG prices remains skewed to the upside in the short term after last week paper correction.
– Pro-nap keeps trading at the lowest seasonal level in the last ten years, both in the East and in the West, and also down the forward curve through September. The current setup points to a summer where steam crackers with switching capacity will keep maximizing propane intake. However, the US blockade threatens LPG supply that had been flowing into India, pointing to a potential rebound in the spread if those cargoes are disrupted in the short term.
– The April 8 ceasefire produced no physical change in naphtha supply or cash differentials. Asian physical prices remain at the same level, around +$140/mt for 2H May deliveries into Chiba. As we pointed out last week, paper timespreads and E/W will keep moving on a headline basis, but cash differentials and cracks have proved themselves immune to the news and remain focused on the lack of supply. Both sit at the same level as before the ceasefire announcement.
– January-to-May West-to-East arbitrage is heading for an all-time record at around 11 Mt since the beginning of the year. Given the current situation, it is very likely that 2026 will end up as the highest-volume year for naphtha arbitrage on record.
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