The front-month CIF large propane cargo swap has widened to its largest discount against the corresponding CIF NWE naphtha cargo swap since October 2018, driven by a stronger underlying crude oil complex which has buoyed naphtha flat prices but has yet to have as significant an impact on the Amsterdam-Rotterdam-Antwerp propane market.
The front-month large CIF propane Northwest Europe cargo swap was assessed at $424/mt Wednesday, while the CIF NWE naphtha cargo swap was at $529/mt, putting the spread between the two prices at minus $105/mt, the largest gap since October 25, 2018, when the spread stood at minus $105.50/mt.
The spread between physical propane cargoes and physical naphtha cargoes meanwhile stood much higher Wednesday at a discount of $73.50/mt, though that too had trended $13.50/mt lower on the day.
The propane-naphtha gap, known as the “pro-nap,” is used as an indicator of propane’s competitiveness against naphtha as an alternative feedstock for petrochemical buyers, with the paper market operating as an effective hedge for cracking operations.
According to sources, the widening of the spreads is in most part due to naphtha having more closely tracked crude prices higher compared to propane.
The front-month CIF NWE naphtha cargo swap was pricing $8/mt higher on Wednesday, moving in line with a higher front-month Brent frontline swap at $66.99/b, up from the previous day’s assessment of $66.47/b.
Signs that the spread may widen further were also evident Thursday with naphtha fundamentals strengthening on the back of stronger gasoline blending demand and unplanned outages at Dow Chemical’s Bohlen steam cracker in Germany and at the Naphtachimie complex in Lavera, France.
“Gasoline looks strong at the moment and is the reason for the strength in the naphtha cracks, though going forward into April we will likely see some length building,” said one source.
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Source: S&P Global Platts