Weak Market Sentiments For Naphtha Across The Globe

The Naphtha prices are reducing in various regions across the globe owing to the poor demand from refineries and low demand for gasoline blending in many areas. June was a disastrous month for the Naphtha market as the bearish trend witnessed during the end of may continue in June and recorded some of the most negative cracker spread in years. The supply-demand scenario that caused the lousy performance of Naphtha in June did not change much and is likely to remain the same during July 2022.

Poor demand for Naphtha in petrochemical industries as a feedstock, particularly in Asia-Pacific regions, due to weak olefins cracking margins in Asian refineries. The weak demand has reduced the Naphtha crackers runs in the Asian-Pacific-based refineries. LPG prices remain depressed and will likely stay the same for the upcoming months. LPG will be the first choice feedstock for petrochemical industries, further crushing the already dampening Naphtha market, especially in Asia.

The demand for Naphtha is also poor for gasoline blenders in the American market. The high octane components required to be co-blended with Naphtha in gasoline blending are highly-priced at the moment, forcing blenders in America not to include Naphtha in the gasoline pool while blending. Refinery utilization is above 90% in the US, which leads to an abundant supply of Naphtha in the domestic market.

In Europe, the naphtha supply has risen as refineries have increased their production runs to obtain robust middle distillates margins. Demand for Naphtha in the European market is already poor, and this steady supply of Naphtha in the domestic market worsens the state of the Europen Naphtha market.

According to ChemAnalyst, the price trend for Naphtha globally will likely continue to drop throughout the third quarter of 2022. The weak demand for Naphtha as a gasoline blending component will likely continue until the end of the driving season in September 2022. In the European region, the market sentiments for Naphtha might only change when the refineries reduce their run rates, which will likely happen only in the last quarter of 2022.