Singapore — The Asian light ends market opened mixed in mid-morning trade on Aug. 17 as gasoline rose on the back of a firmer US RBOB market, fuelled by supply concerns due to US refinery shutdowns.
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Register NowNaphtha demand could weaken should Japanese steam crackers start to cut runs on ample ethylene supply and weakening ethylene margins, while LPG is under pressure amid a well-supplied Middle East market.
The October ICE Brent crude futures rose 39 cents/b from the Asian close Aug.14 to stand at $45.13/b at 0300 GMT Aug.17.
GASOLINE
** The September FOB Singapore 92 RON gasoline swap opened Aug.17 around $48.20/b, 1.76% higher than Aug.14 Asian close as the US RBOB/Brent crack posted a near 22% day-on-day rally due to supply concerns following news of more refinery shutdowns in the US.
** The announcement that Calcasieu Refining's 135,500 b/d Louisiana refinery had idled its units in early August, coupled with news that Phillips 66's 120,200 b/d Rodeo refinery would be converting its refinery to produce renewable fuels ignited concerns of more refinery closures on the horizon, due to prolonged weak refining margins.
** Sentiment in Asia will likely remain cautious this week, sources said, pointing to an expected influx of cargoes arriving from the Middle East and India. The cargoes will weigh on an already well-supplied Asian market, where Chinese exports in August remain heavy.
** Meanwhile, focus will remain on Indonesia demand, while rising cases of coronavirus in other parts of Asia pressures sentiment. Although overall import appetite from state-owned Pertamina was heard to have improved for September cargoes, the lack of fresh spot demand thus far has dented near-term expectations.
NAPHTHA
** The CFR Japan naphtha physical benchmark opened Aug. 17 at $402/mt, up $2.857/mt from the Asian close on Aug. 14, on firmer crude prices.
** Sentiment remained soft for the prompt, as front month September/October Japan naphtha swap was in a contango of 25 cents/mt in mid morning trade Aug.17, brokers said. This was narrower by 50 cents/mt from Aug. 14 Asian close, Platts data showed.
** The spread between CFR Northeast Asia ethylene and CFR Japan naphtha fell to the lowest in more than two months at $340.875/mt at the Asian close Aug. 14 as ample ethylene supply in Japan pressured prices lower. This could prompt some Japanese steam cracker operators to lower operations to reduce ethylene production, which may in turn reduce naphtha demand.
** Trading on H1 October naphtha will start this week, where some demand is set to recover following the completion of Taiwan Formosa's scheduled No. 3 steam cracker turnaround with ethylene capacity of 1.2 million mt/year in end-September.
LPG
** Front month September CP swap notionally indicated Aug.17 at $363/mt, versus $364.5/mt valued Aug.14.
** Saudi acceptances of September term nominations expected early this week, with sources saying that if no cuts were made, or if term exports were raised, this could lower spot FOB requirements from third parties.
** Middle East supply seen ample with ADNOC last week accepting September nominations with one to two weeks ahead of nominated loading dates amid talk most exports would be in the first three weeks.
** September/October CP propane swap notionally indicated Aug.17 at $1.25/mt in contango, from a $1/mt contango Aug.14, on expectations of healthy Middle East supply.
** Market watching if discount of September FEI propane swaps to Mean of Platts Japan naphtha swap would rise further, after the spread widened Aug.14 to $28.5/mt versus $26.5/mt the previous session.
** Taiwan Formosa Petrochemical's import tender for 22,000 mt propane for H2 September delivery, which attracted some 40 offers and awarded around minus $40s/mt to MOPJ naphtha, drove expectations the discount could sharpen further, prompting more petrochemical makers to switch to LPG.
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August 17, 2020 at 11:56AM
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