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European gasoline-naphtha spread at 2-month low due to higher naphtha prices

The discount of European naphtha to its gasoline equivalent shrank to its lowest level in more than two months on the back of higher flat prices for naphtha.

Platts, part of S&P Global Commodity Insights, assessed the front-month CIF NWE naphtha swap discount to the equivalent gasoline swap at $94.50/mt as of Feb. 15, down $11.75/mt on the day and the lowest value since Dec. 16.

The discount has largely narrowed since the end of January, falling by $62.50/mt since Jan. 23, when it was assessed at $157/mt.

The reduced discount reflects recent pricing strength on the European naphtha market, with EU sanctions on Russian oil products, in place since Feb. 5, leaving Europe without its main naphtha supplier.

Imports of Russian naphtha into Europe averaged around 500,000 mt/month prior to sanctions.

The strength in naphtha — a blendstock for gasoline — has also been reflected in a rally for the naphtha crack, which has just reached its highest value in months.

“Europe needs to fill the hole of Russian naphtha and needs to price to attract barrels,” a market source said.

Platts assessed the Northwest Europe naphtha crack up $1.05/b on the day at minus $4.40/b Feb. 15 — the highest price since May 12 and up sharply from minus $13/b Dec. 30, according to S&P Global data.

In gasoline markets, meanwhile, traders have noted a mixed picture, with high tanker freight rates counterbalanced by solid demand.

“There is US demand, we see West African demand, there is decent turnaround,” a market source said. “But the US needs to attract more volumes.”

Freight rates have softened during the week started Feb. 13, after more than doubling the previous week. A voyage on 37 kt clean tankers heading from UK Continent to US Atlantic Coast was valued at $46.06/mt Feb. 15, up from $23.88/mt Feb. 6.

In the week to Feb. 9, gasoline stocks in the Amsterdam-Rotterdam-Antwerp hub were moderately higher, up 1.3%, while naphtha inventories jumped 13.2% over the same period.
Source: Reuters

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