East-bound naphtha seen lowest in 4 months amid Russian product squeeze

By Mohi Narayan

NEW DELHI, Feb 28 (Reuters) - A price cap on Russian naphtha could pressure east-bound supplies to four-month lows in March, estimates by traders and analysts showed.

The Group of Seven nations, European Union, and Australia have capped prices for Russian refined products like naphtha and fuel oil at $45 a barrel to restrict Russia from funding its war against Ukraine.

March supplies from Northwest Europe, the Mediterranean, the United States and Russia into Asia are expected to be around 1.1 million to 1.3 million tonnes, the lowest since October 2022 and down from about 1.5 million tonnes in February, data from traders, Refinitiv Oil Research and Kpler showed.

"Flows could fall further below February levels in March," a Singapore-based trader said, with the east-west arbitrage window closed for some time now.

Traders said the Mediterranean and Amsterdam-Rotterdam-Antwerp (ARA) regions would likely be diverting supplies to Europe amid squeezed flows from Russia after price cap on Moscow-origin products took effect on Feb. 5.

Analysts at consultancy FGE reiterated the sentiment in a monthly note, adding that there could a stronger pull of naphtha from the Mediterranean or the U.S. gulf coast to meet blending demand due to the ban on Russian naphtha in ARA markets.

An India-based trader said that with a negative east-west spread, only Russian naphtha would likely be shipped to Asia in March.

(Reporting by Mohi Narayan; Editing by Robert Birsel)

((Mohi.Narayan@thomsonreuters.com; https://twitter.com/_mohi_;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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