Asia’s light ends markets are largely set to be supported over March 7-11 by surging Brent crude on news that the US was considering a potential ban on imports of Russian oil in tandem with European allies, as part of wider sanctions against Russia’s invasion of Ukraine, says an article published in Platts.
Return of Iranian exports
Naphtha’s strength could be moderated by easing supply tightness, as West-Asia arbitrage lanes reopen.
The gasoline market is weighing the possible return of Iranian exports on hopes of a nuclear deal, amid the recovery in auto fuel demand as coronavirus-related measures are loosened in South East Asia.
LPG is poised to climb to the highest in eight years and three months, driven by the crude’s rally and steady North Asian demand. May ICE Brent traded at $128.55/mt at 0353 GMT March 7, up from $111.14/mt at the 0430 GMT Asian close March 4.
Naphtha
The physical C+F Japan naphtha marker rose $165.875/mt from the previous Asian session to $1,189/mt in mid-morning trade March 7 on higher crude.
Sentiment was robust in the early March 7 trade, with brokers pegging front-month April-May Mean of Platts Japan naphtha swap time spread up $4.50/mt from the previous close to $33.5/mt, S&P Global Commodity Insights data showed.
Asian naphtha expects to see easing supply tightness with Western arbitrage starting to open, sources said. Demand, however, is likely to be weighed down by narrowing olefin margins on the week.
The CFR Japan naphtha physical crack spread against front-month ICE Brent futures widened $40.75/mt on the week to $189.575/mt at the March 4 Asian close, Platts data from S&P Global Commodity Insights showed.
Brokers pegged the East-West spread, the difference between front month CFR Japan and CIF Northwest Europe assessments, at parity in early Asian trade March 7, holding steady at parity compared versus the European close March 4.
The spread had also widened March 4 by $2.50/mt on the week, signaling easing supply tightness, sources said.
The key CFR Northeast Asia ethylene and C+F Japan naphtha narrowed $82.375/mt on the week to $236.875/mt at the Asian close March 4, S&P Global data showed. The thin spread was below typical breakeven levels of $300-$350/mt and is likely to prompt operators to reduce cracker run rates.
Gasoline
Asia’s gasoline is expected to be mixed in the week starting March 7, as market sources said expectations that Iranian gasoline may enter the market offered relief to prices, supported by transport-sector demand amid easing of COVID 19-controls.
While the outlook on the Iran nuclear deal has been encouraged by positive developments surrounding talks between US and Iranian officials, market sources said, some uncertainty emerged following Russia’s demands for a guarantee that its trade with Iran would be unaffected by sanctions on Russia for its invasion of Ukraine.
The March FOB Singapore 92 RON gasoline swap rose early March 7 trade, pegged around $138.72/b at 0300 GMT, up 14.74% from the previous session, Platts data showed. This was supported by regional economies loosening COVID-19 restrictions and driving activity recorded at 42.66% and 47% above baseline levels for Indonesia and Malaysia, respectively, on March 4, latest apple mobility data showed.
Indonesia announced it would be allowing quarantine-free travel for incoming travelers to Bali, starting March 7, while Malaysia is loosening travel restrictions for travelers from Thailand and Cambodia, local media reported.
At 0245 GMT March 7, US RBOB-Brent crack spread rose 13.37% week on week at $29.28/b, S&P Global data showed, possibly fueled by an increase in US product supplied, or implied demand, of finished motor gasoline, which rose 0.99% to 8.74 million b/d in the week ended Feb. 25, the US Energy Information Administration data showed.
LPG
Front-month March propane contract price swap was indicated at $1,002/mt March 7, up from $913/mt valued the previous session. This could put the month-one swap contract on track for the highest since Dec. 4, 2013, when it was valued at $1,010/mt, S&P Global data showed, and is currently pegged $107/mt above the March term CPs.
The premium of butane to propane was indicated at $9.50/mt March 7, versus $8/mt, on continuing firm petrochemical sector demand for propane.
LPG is expected to hold its wide discount to naphtha, with the April FEI propane swap versus Mean of Platts Japan naphtha pegged March 7 around a discount of $131/mt versus $80.75/mt the previous session.
With the reopening of the US arbitrage to Asia, traders estimated LPG exports loading in the US in March at 3.9 million mt, with butane accounting for about 29% of the total.
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Source: Platts
