US stock data triggers mixed response for gasoline, naphtha and LPG in Europe

Quantum Commodity Intelligence - The rollercoaster in the European light ends market continued Wednesday after the Energy Information Administration revealed a huge US gasoline stock draw last week and a low build in US propane stocks, which conversely triggered a fall in European LPG prices.

Backwardation in spot Eurobob barges in ARA widened during the day with lots changing hands $5/mt above the August paper, up from a premium of $3/mt on Wednesday.

After the EIA revealed a 6.1 million barrel draw in US gasoline stocks, the nearby Eurobob curve rallied more than Brent.

Eurobob E5 barges were assessed at $709/mt at 1630 London time, up $11.75/mt ($1.41/b) from Wednesday, while August paper also gained $10.75/mt ($1.17/b) and September paper was up $9.75/mt ($1.17/b).

After dipping lower on Tuesday and Wednesday, nearby Eurobob cracks versus Brent recovered to just surpass levels seen on Monday, although flat prices have fallen around $25/mt.

Naphtha prices in northwest Europe also rebounded, with spot cargoes up $9.50 ($1.07/b) to $661.25/mt alongside similar gains in the August and September paper.

Cracks for naphtha paper in August and September rallied $0.40 and $0.30/b from Wednesday.

However, propane cargo prices in northwest Europe dropped $7/mt from Wednesday to $623.75/mt despite a small 500,000-barrel build in US propane stocks, leaving them at 58 million barrels -- 18.9 million barrels lower than they were a year ago and 14,3 million barrels lower than two years ago.

Recent low stock builds in the US have helped propel propane prices close to naphtha in Europe amid concerns the US would fall short of typical stock levels of around 90 to 100 million barrels in October ahead of the winter.

Implied demand for propane/propylene in the US rose to 1,128 b/d over the week to July 2, up from 993,000 b/d a week earlier, while imports dropped to 70,000 b/d from 103,000 b/d a week earlier.

However, the spread between propane and naphtha cargo prices in Europe ballooned out $16.50/mt Thursday, although this remained wide enough at $37.50/mt to leave steam crackers favouring naphtha as a feedstock, sources noted.

The propane versus naphtha spread had narrowed amid thin liquidity recently, and its correction Thursday still leaves the spread still narrower than at the start of July.