Naphtha Markets Diverge as Europe Weakens While Asia Remains Tight

European Oversupply

In Europe, naphtha is struggling. The demand for gasoline blending has evaporated with the seasonal demand slump, leaving excess naphtha looking for a home. Petrochemical crackers in the region are running at reduced rates due to high energy costs, further limiting local consumption.

Asian Demand Pull

Conversely, Asia remains a stronghold for demand. Petrochemical plants in South Korea and Japan are running at higher utilization rates, requiring steady inflows of feedstock. This demand is keeping the 'East-West' arbitrage window open, encouraging traders to ship excess European barrels to the Far East.

LPG Competition

Naphtha is also facing competition from Liquefied Petroleum Gas (LPG) as a feedstock. With propane prices softening recently, some flexible crackers may switch to the cheaper gas option, potentially capping the upside for naphtha prices in the near term.