According to Gibson, “the spread itself is not the problem. It averaged about $65/mt in October, swinging between $45/mt and $120/mt, well above the $20-45/mt range that held through most of 2025. In March, it sat comfortably above the cost of moving naphtha from the Med to Japan, and Western barrels flowed. Since then, freight has risen far faster than the spread. LR2 Med/Japan freight has eased by around a quarter from its mid-October peak, but still sits well above the spread on a per-tonne basis. The arbitrage is technically shut, but cargoes are still moving, albeit in smaller volumes and increasingly on smaller ships”.

“The ships tell the same story. LR2s lifted only 2 of October’s 24 Western cargoes, down from 6 in January, while MR cargoes doubled from 10 to 21. The shift is centred on the Med, which shipped 15 MR cargoes to Asia in October against just one in January, while the US Gulf sent only two. LR2 availability has been limited by heavy dirty-up activity since the war began. More LR2s are also positioned in the East than the West, with most engaged on westbound clean runs from the Middle East and India. Eastern naphtha has increasingly relied on LR1s and MRs. MRs lifted 22 Middle East naphtha cargoes in October, up from 15 in January, while LR2 cargoes fell to 10 from 31. Shorter-haul Eastern supply has not brought cheaper freight. LR1 and LR2 rates from the AG to Japan have more than doubled since July, and LR1 and MR rates from West Coast India to Japan have more than doubled since August. Tanker attacks, Gulf of Oman congestion and tight LR lists have kept every route into Asia firm, although AG LR rates eased slightly in the final week of October”, Gibson noted.

Feedstock economics have improved, though cracker margins remain thin. The ethylene-naphtha spread fell back in October to below its 2025 average, as ethylene failed to keep pace with rising naphtha prices. Benzene and PX spreads sit close to breakeven. The propane-naphtha spread averaged around -$160/mt in April, when propane offered crackers a much cheaper feed. It has since narrowed to near zero, with both products trading around $1,040/mt in late October, removing much of the incentive to switch away from naphtha and restoring its competitiveness as a cracker feedstock in Asia. Weak downstream petrochemical margins and ongoing cracker rationalisation remain a cap on how far demand can recover. With the East-West spread well above 2025 levels but still short of freight, LR rates have become the bigger moving part: a $100/t swing in Med/Japan LR2 freight within October far outweighed the change in the spread, whose monthly average rose only around $12/mt. If LR freight continues to soften and moves closer to the spread, more Western naphtha could return on December loadings. Until then, Asia’s naphtha will come mainly from the Gulf of Oman and India, with freight costs driven largely by the LR market. Nikos Roussanoglou, Hellenic Shipping News Worldwide