Asia’s light end markets were trading higher in mid-morning trade Oct. 11 on firmer crude futures, with gasoline further supported by improving demand in India, Pakistan and Southeast Asia, while naphtha buying activity is likely to pick up this week before the trading cycle shifts to a new half-month period, shows Platts data.
LPG’s uptrend is likely to persist as market sentiment is supported by looming winter requirements, PDH demand and concerns over US supply, though Middle East volumes in Asia remain ample.
Front month December ICE Brent crude futures stood at $83.57/b at 0410 GMT Oct. 11, up $1.19/b from the previous close.
- The November FOB Singapore 92 RON gasoline swap rose 1.09% to be pegged notionally at $91.43/b in early Oct. 11 trade.
- The US RBOB-Brent crack hit a 25-day high at 0230 GMT Oct. 11 at $16.80/b.
- Higher gasoline demand was leading the recovery in Asia, with India’s appetite set to remain robust in the near term as the end of monsoon season paves the way for a string of holiday festivities.
- Malaysia is resuming inter-state travel from Oct. 11 as vaccination rates in the adult population reach 90%, and market sources are expecting gasoline demand to firm as mobility picks up.
- Pakistan’s near-term demand for oil products is expected to increase, especially for gasoline, amid a narrowing price gap between CNG and gasoline due to the imposition of a 5% customs duty and 17% sales tax on imported LNG.
- The physical C+F Japan naphtha marker rose $2.50/mt from the previous Asian session to $767.625/mt in mid-morning trade Oct. 11 on higher crude.
- Stable sentiment was reflected in naphtha swaps; brokers pegged the front-month physical half-month November-December Mean of Platts Japan naphtha swap spread at $8.00/mt in mid-morning trade Oct. 11, up 25 cents/mt from the Oct. 8 Asian close, S&P Global Platts data showed.
- The Asian naphtha market has seen muted activity for the current H2 October-delivery cycle as end-users held back due to high prices. but buying interest was likely to pick up as this is the final week before the trading cycle shifts to the next half-month period.
- The CFR Japan naphtha physical crack against front-month ICE Brent crude futures has entered the week strongly after touching a more than five-year high of $141.275/mt at the Oct. 8 Asian close, up $10.075/mt day on day and up $16.275/mt month on month. The crack was last higher Jan. 6, 2016 at $141.475, Platts data showed.
- Asian naphtha demand in the coming week is likely to be led by healthy olefins margins and little opportunity to use LPG as alternative feedstock amid a recent uptrend in LPG prices.
- The spread between CFR Northeast Asia ethylene and C+F Japan naphtha narrowed $23.125/mt day on day to $384.875/mt at the Asian close Oct. 8, Platts data showed. However, the spread remains above the breakeven level of $300-$350/mt for non-integrated producers, which was likely to encourage steam crackers to operate at full or near full capacity.
- The front-month November propane contract price swap was notionally indicated at $840/mt Oct. 11, down from $850/mt Oct. 8. This is $40/mt higher than October term contract prices. In early trade Nov. 11, the November CP propane swap last transacted at $858/mt, $8/mt higher than in the previous session, on stronger crude futures.
- The November-December CP propane swap was indicated in a contango of $9/mt Oct. 11, widening from $1/mt previous session, while December-January was indicated in a backwardation of $3/mt, unchanged over the same period.
- ADNOC is due to announce acceptances of November-loading term nominations early in the week starting Oct. 11, followed by Saudi Aramco by the weekend.
- Aramco may have 2-3 spot FOB cargoes of varying propane/butane ratio to offer, probably for November loading. Sources said these may indicate where Aramco aims to set its November term CPs, at around $900/mt versus $800/mt for the October term propane CP, on track for the sixth consecutive monthly increase.
- Supply of Middle East spot cargoes was considered ample; producers may be leveraging strong market sentiment amid concerns over US supply, propane demand ahead of winter and propane dehydrogenation plants ramping up production.
- The availability of Iranian cargoes also provides a buffer in meeting demand.
- The November CP propane swap premium to butane was indicated at $35/mt Oct. 11, narrowing from $40/mt the previous session.
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