Asia’s light end markets declined in mid-morning trade Aug. 10, with spot prices coming off from the Aug. 6 Asian close, due to a sharp decline in benchmark crude prices.
Regional gasoline demand continued to struggle as the delta variant of COVID-19 saw further spike in cases, and as Asian governments continue to impose travel restrictions to curb virus transmission.
Asian naphtha physical crack touched a fresh multi-year high, but narrowed downstream margins weighed on spot premiums for cargoes.
LPG markets in the key supply region of the Persian Gulf awaits fresh market direction, which will come in the form of a spot tender result from Qatar.
Front-month ICE October Brent crude futures stood at $69.16/b at 0400 GMT Aug. 10, down $2.62/b from the previous Asian close Aug. 6.
Gasoline
**The September FOB Singapore 92 RON gasoline swap fell at the start of the new trading week, being pegged notionally lower at around $76.84/b in early Aug. 10 trading, a 3.49% decrease from the previous trading session as outright prices slid, in line with the weakness in the wider oil complex.
**Concerns in the wider oil complex stemmed from the continued spread of the COVID-19 delta variant, both in the West and in Asia, raising fears over a slight drag in oil demand. In the West, US driving activity trended lower from a mid-July peak, with Apple mobility data showing driving activity averaging 159.7% of the index’s January 2020 baseline in the week ended Aug. 6, down three percentage points from the week prior.
**Meanwhile in Asia, industry participants will focus on the impact of China’s long-awaited second batch of oil product export quotas. The quotas, which were announced on Aug. 9, total 7.5 million mt. Of the total quotas, 37.6%, or 2.82 million mt, went to PetroChina, followed by Sinopec at 2.66 million mt, equaling 35.5% of the total. Private refiner Zhejiang Petroleum & Chemical got 520,000 mt of quotas in the new round, bringing its total quota to 2.52 million mt, up 152% from a year earlier.
**Although expectations are for China to raise gasoline exports from end-August to September onward to help offset rising domestic inventories, gasoline exports for the remainder of 2021 could still be tight, especially as a third round of export quota allocation looked increasingly unlikely, market sources said.
Naphtha
**The physical C+F Japan naphtha marker fell sharply by $17.25/mt from the Asian close on Aug. 6 to $657.25/mt in mid-morning Asia trade Aug. 10, on lower crude.
** Overall sentiment was firm, as demonstrated by the CFR Japan naphtha physical crack against front-month ICE Brent crude futures, which rallied to a multi-year high of $136.15/mt at the Aug. 6 Asian close, up $5.425/mt on the day, Platts data showed. The crack was last higher on Jan. 6, 2016 at 141.475/mt.
** Naphtha swaps also reflected firmer sentiment, as front month September-October Mean of Platts Japan naphtha swap spread was pegged by brokers at $8.75/mt in mid-morning trade Aug. 10, up from $8/mt at the Asian close Aug. 6, Platts data showed.
** Yet, cash differentials for spot paraffinic naphtha parcels have fallen as narrowed downstream margins weighed on buying sentiment compared to the previous half month cycle: the spot premium averaged $12.20/mt over July 19-30 compared to $8.75/mt over Aug. 2-6, against benchmark Mean of Platts Japan naphtha physical, on a CFR Japan basis minimum 65% paraffin content, Platts data showed.
LPG
**Front-month September Saudi Aramco propane contract price swap was notionally indicated at $657.50/mt Aug. 10, versus $662.50/mt valued on Aug. 6, and $2.50/mt at the August term contract prices.
**The September propane CP swap was indicated $5/mt above butane Aug. 6, unchanged from the previous session.
**September-October propane structure was indicated at $2/mt in backwardation Aug. 10, while October-November was at parity.
**Market participants will be keeping a close watch on spot tender result for Qatar petroleum’s export tender for 45,000 mt propane for Sept. 1-5 loading, which is likely to set the tone for spot barrels loading from the Persian Gulf.
** Freight rates between the Persian Gulf and Japan are also creeping higher with rates potentially nearing the $44/mt level by the week. On Aug. 6, the PG-Chiba rate was assessed at $43/mt, but dipped to as low as $42/mt on Aug. 5.
** This week, market participants are also expected to receive further announcements around term cargo acceptance dates for September loading from Saudi Arabia and UAE later this week or early next week.
**Incremental demand for LPG as alternate petrochemical feedstock is not expected to emerge as September FEI propane swap indicated at a premium of $41.25/mt Aug. 10 versus $25.75/mt on Aug. 6.
Source: Platts