The August naphtha crack swap was pegged at around minus $1.50/barrel Thursday morning, a trader said, up from around minus $3.75/b a week ago.
Cracks have risen steadily through the week, rebounding from the lows seen at the start of August of around minus $5/b, sources said.
The rise in cracks follow lower production levels of naphtha as poor refinery margins have reduced run rates, sources said.
In addition strength in the Asian naphtha markets has had a knock-on effect on European naphtha values, sources added.
The arbitrage to Asia for naphtha has started to open in recent days,according to trading sources.
"The arbitrage to Asia, depending on quality, is working," a trader said. "Refiners cut runs, now we are seeing the effect, there is not a lack of material but it is supported by local demands and an arbitrage to Asia."
The rise in naphtha cracks and slump in gasoline cracks has led to the spread between the two products narrowing significantly, sources said.
The spread, which narrowed to slightly below $20/mt on Wednesday, fell to around $11-12/mt Thursday morning, the trader added.
In the physical market the spread between CIF NWE naphtha cargoes and Eurobob gasoline barges narrowed to $10.50/mt Wednesday, compared with $16/mt Tuesday, $38.25/mt last Tuesday and $61.5/mt at the start of August, according to Platts data.
The gasoline-naphtha spread is a means of assessing blending economics for gasoline. The cheaper naphtha is relative to gasoline, the more economically advantageous it becomes to use naphtha to make gasoline.
China Chemical Weekly: http://news.chemnet.com/en/detail-1403616.html
