Asia’s light end markets were lifted by bullish sentiment in crude oil futures in mid-morning trade Nov. 8, with sentiment also firm due to demand-side factors, including expectations of firming gasoline demand as pandemic restrictions ease and mobility increases, says Platts insight.
Naphtha remained the key steam-cracker feedstock, and demand for feedstock was high amid positive olefin margins, while LPG was set to see trading kick off for December cargoes this week amid demand for winter heating.Front-month December ICE Brent crude futures stood at $83.67/b at 0359 GMT Nov. 8, up $2.54/b from the previous Asian close.
Gasoline
The December FOB Singapore 92 RON gasoline swap was notionally pegged at $91.32/b in early Nov. 8 trading, up 2.73% from the previous trading session.
Fundamentals in the Asian gasoline market are likely to hold firm this week. Gasoline demand emerged in Vietnam, with Petrolimax in the spot market seeking 10,000 mt of 92 RON gasoline for loading over Nov. 16-18 in a tender that closes Nov. 8 with same-day validity, according to the tender document.
Vietnam’s aviation authority announced plans Nov. 5 to resume international commercial flights with 15 countries from January 2022, with quarantine waived for vaccinated travelers. Market participants were optimistic that gasoline demand will also pick up following the announcement.
Market participants will also focus this week on demand-side drivers from Indonesia, Southeast Asia’s largest gasoline buyer, with November import volumes remaining robust and expected to surpass 12 million barrels, according to market participants.
Indonesian authorities recently announced the reopening of the tourism sector, which is expected to support the overall gasoline complex. Driving activity, a proxy for gasoline demand, surpassed 80% above baseline levels on Nov. 6, according to Apple Mobility data.
Naphtha
The physical C+F Japan naphtha marker jumped $17.25/mt from the previous Asian session to $783.50/mt in mid-morning trade Nov. 8 on higher crude.
Stable sentiment was reflected in naphtha swaps; brokers pegged the front-month November-December Mean of Platts Japan naphtha swap spread unchanged from the previous close at $14.50/mt in mid-morning trade Nov. 8, S&P Global Platts data showed.
Asian naphtha supply was tight on low Western arbitrage levels, and firm demand from use as petrochemical feedstock.
The key CFR Northeast Asia ethylene to C+F Japan naphtha spread remained above the typical breakeven level of $300-$350/mt for non-integrated producers, narrowing $2.125/mt on the day to $403.75/mt at the Nov. 5 Asian close, Platts data showed. The healthy spread is likely to motivate operators to keep run rates full or near full capacity, market sources said.
LPG
The front-month December propane contract swap was notionally indicated at $865/mt mid-morning Nov. 8, up from $849/mt Nov. 5. The December CP butane swap was indicated at $21/mt below propane, down from $22/mt at the Nov. 5 Asian close.
Firm sentiment was reflected in derivatives, with the December-January CP propane swap indicated at a backwardation of $23/mt Nov. 8, widening from $22/mt the previous session.
Butane prices were heard narrowing the gap to propane due to buying activity last week by Indonesia’s Pertamina for November cargoes, and a similar trend for propane/butane basis key Mont Belvieu pipe.
Upcoming North Asia demand was expected to be fueled by anticipation of an early and cold winter, low inventory in Japan, and Chinese PDH plants.
US LPG arbitrage inflows to Asia continued to be stymied by delays at the Panama Canal due to a pilot shortage, and nine LPG carriers were awaiting transit at the northern entrance as of mid-morning Nov. 8, according to Platts cFlow trade-flow analytics software.
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Source: Platts
