FX.co ★ Naphtha Holds Rebound from Q2

In September, futures for naphtha cargoes set for delivery in Northwest Europe were priced at $560 per tonne. This reflects a steady recovery from the low of $525 seen in April, as markets weigh the petrochemical demand outlook against the availability of feedstock supply. The European market faced continued supply constraints of petrochemical feedstocks from Asia, exacerbated by Ukrainian assaults on Russian refineries, which curtailed output from a major provider to Asian manufacturing sectors. Consequently, there has been heightened competition for European buyers. This situation is further strained by the European Union's proposed sanctions on Russian energy, targeting multiple fuel tankers and imposing constraints on countries maintaining full-scale business with Russian energy producers. Meanwhile, OPEC+ has increased production rates, which has tempered the extent of the upward momentum for naphtha since April. Additionally, declining manufacturing PMI figures in Europe signal weak demand for industrial applications of fuel, as well as for paints and solvents, which are typically associated with light distillates.