Key facts
- Mediterranean naphtha exports to Asia hit a four-month high in August.
- August loadings averaged 219,000 b/d, up from 126,000 b/d in July.
- Recovering Asian petrochemical demand is a key driver.
- Supply uncertainty in the Middle East is redirecting cargoes.
- Weak European demand is attributed to low Rhine water levels and subdued gasoline blending.
Mediterranean naphtha exports to Asia have surged to a four-month high in August, driven by recovering petrochemical demand in Asia and supply concerns in the Middle East, while Europe grapples with weak domestic demand. Loadings from the Mediterranean to Asia have averaged 219,000 barrels per day (b/d) so far in August, a significant increase from 126,000 b/d in July, according to Kpler data.
Asian petrochemical producers have restarted cracker operations after earlier shutdowns due to poor margins and feedstock disruptions, boosting demand for imported naphtha. Although the Middle East is a traditional supplier, regional tensions have prompted Asian buyers to seek alternative sources, including the Mediterranean. The arbitrage for shipping naphtha from the Mediterranean to Asia remains open.
In Europe, naphtha demand is subdued. Record-low water levels on the Rhine River have hampered feedstock deliveries to inland petrochemical crackers and restricted product movement. Shell's closure of its nearby refinery has increased reliance on imported feedstocks for its Wesseling crackers, while BASF's Ludwigshafen crackers face logistical challenges in moving products by barge. Some petrochemical crackers are also affected by reliance on river water for cooling.
Weaker domestic demand has resulted in more naphtha being available for export. Naphtha stocks in the ARA hub increased to 598,000 tonnes by August 13, a 74% rise from a month prior. Supply has been bolstered by high naphtha yields from lighter crude slates and strong refinery runs, with refiners processing attractive light Mediterranean crude and CPC Blend.
European naphtha cracks against Ice Brent futures have traded at a discount for most of August, averaging around $4/bbl over the past week. Naphtha cracks against prompt North Sea Dated crude have also been negative. Despite favorable margins, European gasoline blending has offered limited support for naphtha demand, with traders noting slowed buying interest for naphtha and high-octane blending components.
The east-west naphtha swap spread has widened, improving the economic incentive for eastbound movements, reaching $37.50/t on August 19, up from $30/t on August 13.