Asia Light Ends: Key Market Indicators for Feb 7-11

Naphtha market

The naphtha market was seen balanced between tight supply from the West to Asia and demand softened by poor olefins margins, while LPG was recovering amid the recently closed West arbitrage and expectations of improving demand in March from China and India.

ICE April Brent crude futures

Front-month ICE April Brent crude futures stood at $93.55/b during midmorning Singapore time Feb. 7 (0424 GMT), up from $91.79/b at the Asian close Feb. 4.

Gasoline

• The March FOB Singapore 92 RON gasoline swap rose in early Feb. 7 trading, to be pegged notionally around $105.75/b at 0200 GMT, up 2.22% from the previous session, S&P Global Platts data showed.
• US RBOB-Brent crack weakened marginally 0.16% from the previous session to $20.11/b at 0200 GMT, though the US RBOB-Brent crack held 30.67% above the $15.39/b January average, Platts data showed. US product supplied, or implied demand, of finished motor gasoline fell 279,000 b/d to 8.23 million b/d in the week ended Jan. 28, the US Energy Information Administration data showed.
• India’s gasoline demand would likely continue to recover on improving economic activity as COVID-19 cases kept declining, sources said, adding the peak of the outbreak has passed in the country. Driving activity, a proxy for gasoline demand, was recorded at 124.38% above baseline levels on Feb. 4, surging from the January average of 77.46% above baseline, latest Apple mobility data showed. This comes as several states have eased restrictions. Delhi has removed weekend curfew restrictions and eased the odd-even market curtailments while allowing movie halls and restaurants to operate at limited capacity.
• The upside in the gasoline complex remains capped by increasing supply in the week. Taiwan’s CPC Corp. was offering 33,000 mt of 92 RON catalytic cracked spirit for March loading from Kaohsiung in a spot tender closing Feb. 8, with validity till Feb. 10. India’s Nayara Energy was offering 58,000-60,000 mt of 92 RON gasoline for March loading from Vadinar, in a spot tender closing Feb. 8, with same-day validity.
• Indonesian gasoline imports were estimated around 11 million barrels in February and March each, up from some 10 million barrels in January, sources said, adding that buying activity would remain high unless something drastic happens due to COVID-19.

Naphtha

• The physical C+F Japan naphtha marker rose $9.875/mt from the previous Asian session to $847.50/mt in midmorning trade Feb. 7 on higher crude.
• The sentiment was stable, as brokers pegged front-month March-April Mean of Platts Japan naphtha swap time spread up 25 cents/mt from the previous close at $14.75/mt, Platts data showed.
• Asia’s naphtha market has seen a mix of bullish and bearish factors, as support from tight Western supply was countered by unprofitable olefins margins dampening naphtha demand.
• The market strength was mirrored in the CFR Japan naphtha physical crack against front-month ICE Brent crude futures strengthening $18.075/mt week on week to $149.20/mt at the Feb. 4 Asian close, Platts data showed.
• Cash differentials for spot minimum 65% paraffinic naphtha parcels were assessed at $20/mt on Feb. 4, up 70.21% on the week, against MOPJ naphtha physical on a CFR Japan basis, Platts data showed.
• The key CFR Northeast Asia ethylene and C+F Japan spread naphtha narrowed $31.875/mt on the week to $162.375/mt at the Asian close Feb. 4, Platts data showed. The spread has rested below the typical breakeven level of $350/mt for non-integrated producers since end-December 2021, prompting steam crackers to operate below full capacity, weighing on naphtha demand, sources said.

LPG

• Front-month March propane contract price swaps was pegged at $782/mt early Feb. 7 before trading at $790/mt, up $12/mt from the previous session Feb. 4. The March-April backwardation was indicated between $30.50/mt and $38.50/mt versus $32/mt the previous session.
• CP propane swap was indicated at $12/mt below butane, steady to the previous session, signaling concerns over butane supply from the Middle East and the US, even as the market was anticipating Indian spot demand to reemerge in March after a lull.
• Abu Dhabi National Oil Co is expected to announce acceptances of March-loading term nominations by Feb. 10-11.
• The market was balancing news of cancellations of several Asia-bound US LPG cargoes loading in February and March with the recent downtrend in Very Large Gas Carrier rates toward $47/mt and hopes of a recovery in regional prices, as demand improves with China’s return from the Lunar New Year holidays.
• Also being watched was the continued viability of LPG as an alternative petrochemicals feedstock, as March FEI propane’s discount to the MOPJ naphtha assessment was indicated early-Feb. 7 near $52/mt from $42/mt the previous session.