Propane–naphtha spread tightens to eight-month low

: LPG, Oil products
25/11/28

The gap between European propane and naphtha prices has narrowed to its tightest level in nearly eight months, eroding the cost advantage that had previously favoured propane in petrochemical feedstock slates. The spread contracted to -$39/t on 27 November from -$120/t earlier in the month, as rising propane and easing naphtha values squeezed the differential.

Propane strengthened notably through November, with northwest European cif Amsterdam-Rotterdam-Antwerp (ARA) prices climbing to a two-month high of $473/t on 27 November, up by nearly $25/t from the start of the month. Colder weather in recent weeks incentivised propane use as a heating fuel, lending support to prices that had hovered near $450/t for much of the past few months. This support became more pronounced as the broader energy complex came under pressure from concerns of oversupply sparked by Russia–Ukraine peace negotiations. Steady bidding inquiries for propane tightened prompt availability and encouraged buyers to lift their bids.

Naphtha, meanwhile, drifted lower over the same period. European naphtha values slipped to $511.75/t on 27 November, down by around $35/t since the start of the month, as regional refineries gradually returned from a heavy maintenance cycle and added supply to a seasonally soft gasoline blending environment. The restart of units at Shell's 404,000 b/d Pernis refinery in the Netherlands, which is expected to return fully next week, could inject further supply into the system and deepen pressure on naphtha values.

The simultaneous rise in propane and fall in naphtha pulled the inter-feedstock differential back to its narrowest since early April.

The retreat of the propane discount from triple-digit lows to around –$39/t materially reduces the incentive for petrochemical operators to favour propane. Earlier in November, when the discount reached –$120/t, flexible crackers maximised propane intake to capture sizeable margin benefits. With the discount now far closer to parity, operators may gradually rebalance towards naphtha, particularly as more refinery capacity returns through December.

If the spread narrows further, propane could face downward price pressure as its feedstock advantage erodes — especially if US imports remain strong and heating demand stays weak.

By Efcharis Sgourou and Benedict George

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25/12/04

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25/12/04

Qatar presents 2040 climate target to UN

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25/12/03

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25/12/03

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25/12/03

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