European and Asian Naphtha Prices Drop Nearly 20% as Oil Markets Ease

Naphtha markets in Europe and Asia have reversed much of their strong October rally, with prices falling by nearly $180/ton in just two weeks as expectations of reduced tensions in the Middle East have increased. Weekly average prices in both regions have dropped to their lowest levels since late August, marking a sharp shift from the multi-month peaks recorded in late October.

The decline has been driven by easing geopolitical risk premiums and lower crude oil prices, which have reduced feedstock costs. However, questions remain over whether the downward trend will continue.

European Naphtha Erases October Gains After Sharp Correction

European naphtha prices have undergone a significant correction following their late-October surge. Weekly average prices on a CIF Northwest Europe (NWE) basis fell to $782/ton in the week beginning November 9, compared with $960/ton in the week of October 26. This represents a decline of $178/ton, or 19%, over two weeks.

The drop has erased the gains recorded throughout October, bringing prices back to levels last seen in late August. The correction follows a strong rally that pushed European naphtha to its highest level since March 2022 in late October, supported by limited prompt availability, falling inventories and competition for cargoes from Asia.

However, the market has since weakened as expectations of a possible diplomatic breakthrough in the Middle East have reduced risk premiums across energy markets.

Asian Naphtha Falls 17% from Recent Six-Month Peak

A similar correction has taken place in Asia, where naphtha prices have retreated considerably from their late-October highs.

CFR Japan naphtha prices declined to $902/ton in the week beginning November 9, down from $1,081/ton in the week of October 26. The decrease amounts to $179/ton, or 17%, over the two-week period.

The latest weekly average is the lowest since late August, reversing much of the rally that had taken Asian prices to their highest levels since early May. During October, the market received support from refinery maintenance in China, Japan, India and South Korea, alongside reduced supplies from the Middle East and stronger crude oil prices.

However, expectations of improved regional availability as refineries resume operations have added to the downward pressure. Falling crude oil prices have also weakened cost support. Despite the recent decline, Asian naphtha continues to trade above European levels, reflecting differences in regional supply conditions and import requirements.

Easing Middle East Tensions and Lower Crude Oil Prices Drive Decline

The recent weakness in naphtha markets has coincided with a broader decline in energy prices, as diplomatic efforts have raised hopes of easing tensions between the US and Iran.

Oil markets have shed a substantial portion of the geopolitical risk premium accumulated during the Middle East conflict. Brent crude fell from its second-highest settlement of $117.64/bbl since the outbreak of the Iran-US war to an intraday low of $89.18/bbl on November 10, representing a decline of around 24%. Prices later recovered some ground, trading at approximately $93/bbl on November 12.

The sharp correction has been driven by growing expectations of a diplomatic resolution to the conflict, along with signs of recovering crude flows from the Persian Gulf.

Meanwhile, lower freight costs have eased pressure on international oil product trade and altered arbitrage economics between Europe and Asia. Nevertheless, the market outlook remains sensitive to developments around the Strait of Hormuz, where disruptions to regional energy shipments continue to affect global supply chains.

Stay ahead of market trends with the Credco app. For any queries, please reach out via WhatsApp at +91 8448083211.