European ethylene oversupply intensifies amid lockdowns, price at 11 year low.

Ethylene was assessed at Eur513/mt FD NWE Thursday, down Eur12/mt on the day and the lowest since January 22, 2009 when it was at Eur505/mt FD NWE.

"Even with low prices Europe needs to reduce stocks, or shut down their production, which could be a disaster," one source said.

Although domestic spot markets remained muted, exports to Asia are continuing to help reduce the supply length somewhat, with some very low prices heard. This week market sources said they saw cargoes to the Far East Asia and Indonesia from ARA, loading end of March, at around $200/mt FOB NWE -- significantly below the domestic market.

Ethylene spot prices in Asian were down $5-$10/mt on the day to $540/mt CFR Northeast Asia and $525/mt CFR Southeast Asia Thursday .

"A lot of volatility. There is going to be lower prices, some sort of correction. We will see. Market is well supplied, that is still reality," another source said.

A similar trend was observed in the European naphtha market as shipowners considered once again sending naphtha cargoes eastbound despite high freight costs due to the collapse in physical naphtha prices, sources said.

Naphtha CIF NWE was assessed at $126/mt on Monday, the lowest seen since March 1999. The market has bounced back since the beginning of the week, closing at $163/mt Thursday.

The April East-West spread -- the premium of the CFR Japan naphtha cargo swap over the CIF NWE equivalent -- was assessed at $33.5/mt Thursday, a $1/mt increase day-on-day, according to Platts data.

The European naphtha CIF NWE cargo premium to propane CIF NWE large cargo was seen at $16.5/mt on Thursday, the lowest since December 2017, but the market was mixed regarding whether that would be a motivation for petrochemical producers to utilize naphtha at higher rates as a feedstock rather than propane.

Some petrochemical producers worried that there could be naphtha supply shortages around the corner as many European refiners look at reducing runs, while other market participants noted that demand was very limited and supply ample amid market volatility and bearish sentiment.

"If the cracker is a bit flexible one can get as much [naphtha] as they want in the market," a source said.

In addition, European spot cracker margins as of Thursday were down by Eur150.56/mt since the start of the week following the rebound in naphtha prices. Month on month, European cracker margins gained value massively so far in March, since the falls in the upstream markets, by 29% in the contract margins and by 49% in spot, according to Platts data.

However, with the increasing volatility in the upstream and uncertainties on the demand side, as COVID-19 effect deepen in Europe and around the world, ethylene market fundamentals are set to remain unbalanced and cracker operators will find it difficult to place their tons, market sources said.

"At these kind of prices, US is blocked for C2 imports. Asia could be open if they will recover, Europe will begin to ship [more]. Otherwise, people will have to manage their own balances," a fourth source said.