Naphtha Steadies Above Recent Lows

Futures for naphtha cargoes to be delivered in Northwest Europe were at $560 per tonne in September, holding its gradual rebound since April's plunge bottomed at $525 as markets continued to assess the outlook of petrochemical demand and the supply of their feedstock. Signs of tightness in the supply of petrochemical feedstocks from Asia persisted as Ukrainian attacks on Russian refineries limited output from the key producer to Asian manufacturing hubs, increasing buying competition for Europe. This was magnified by proposed sanctions from the EU on Russian energy, including multiple fuel tankers and measures against countries that fully engage in business with Russian energy producers. In the meantime, a series of output hikes from OPEC+ limited the magnitude of Naphtha's positive momentum since April. Also, contractionary manufacturing PMIs in Europe reflected poor demand for the broad industrial uses in fuel, and for paints and solvents commonly used in light distillates.

Naphtha futures were at $560 per tonne at the start of September, steadying somewhat above the lows of $525 that were tested since the slump triggered by the announcements of US tariffs in April as markets continued to assess manufacturing demand in the US against the uncertain supply of crude oil feedstock. Signs of tightness in supply of crude oil supported petrochemicals, with Ukrainian attacks on Russian oil refiners limiting crude-processing runs. This offset the impact of the rebound in seaborne oil exports out of Russia, flooding refiners in China, and magnified by limited buying from India due to the weaker rupee. The demand outlook in the US remained muted as prices remained well below the $625 from before the "Liberation Day" selloff. The ISM Manufacturing PMI pointed to a sharper than expected contraction in factory activity in August, reflecting poor demand for the broad industrial uses in fuel, and for paints and solvents commonly used in light distillates.