Asia’s light end markets were weaker in mid-morning trade on Aug. 16, as the spread of the ‘Delta’ variant of the coronavirus in China dampened demand sentiment, compounding concerns over higher Chinese gasoline exports.
Naphtha declined on lower crude, while spot paraffinic naphtha’s cash differentials were weakened by narrowing olefin margins.
LPG is awaiting Saudi acceptances for September, which might see some deferments, though overall supply from the Middle East and US is ample, keeping prices steady to slightly lower from the previous session.
Front-month ICE October Brent crude futures stood at $69.85/b at 0350 GMT on Aug. 16, down 75 cents/b from the previous close.
Gasoline
**September FOB Singapore 92 RON gasoline swap softened, and was pegged notionally around $77.92/b in early Aug. 16 trading, down 1.1% from the previous trading session, as the oil complex faces downside pressures on concerns over the coronavirus spread in China.
**The outbreak of the ‘Delta’ variant in China saw 143 new cases reported on Aug. 9, the highest since January 2021, John Hopkins University data showed.
**Industry participants will closely watch for signs of near-term increases in China’s gasoline exports. Lockdowns in several regions that weaken Chinese domestic demand, and high inventory levels caused by the delay of the second round of refined oil export quotas, could prompt Chinese refiners to raise exports, sources said.
**Hopes are also on demand increases in Southeast Asia, where top gasoline buyer Indonesia is set to ease some lockdown measures on Aug. 16.
The country’s new infections have steadily declined since the mid-July peak, though cases remain around the 25,000 mark.
**Indonesia and Malaysia, another large buyer of gasoline, will also begin easing some movement curbs from Aug. 16, though only for those fully vaccinated.
Naphtha
**The physical C+F Japan naphtha marker fell by $13.375/mt from the Aug. 13 Asian close to $649.125/mt in mid-morning Asia trade on Aug. 16, on lower crude.
**Naphtha end users are slated to begin trading for the new trading cycle H1 October-delivery cargoes this week.
**Cash differentials for spot paraffinic naphtha parcels were pressured by narrowing olefin margins, falling $4.75/mt month on month to $5.50/mt on Aug. 13, against the benchmark Mean of Platts Japan naphtha physical, on a CFR Japan basis, S&P Global Platts data showed.
**The key spread between CFR Northeast Asia ethylene and CFR Japan naphtha physical fell $28/mt on the week to $367.50/mt on Aug. 13, Platts data showed. Although this was above the typical break-even spread of $250/mt for integrated producers, it was below the $300-$350/mt break-even level for non-integrated producers.
** Naphtha swaps also reflected the weaker sentiment, as brokers pegged front-month September-October Mean of Platts Japan naphtha swap spread at $6.25/mt in mid-morning trade on Aug. 16, down from $6.50/mt at the Asian close on Aug. 13, Platts data showed.
LPG
**Front-month September propane contract price swap was notionally indicated at $675/mt on Aug. 16, compared with $678/mt on Aug. 13, and $15/mt above the August term contract prices.
**September propane CP swap was indicated $8/mt above butane on Aug. 16, putting the term CPs on track for the fourth-straight monthly increase and possibly the highest so far this year.
**Both September-October and October-November propane swap structures were indicated at $1/mt backwardation on Aug. 16.
**Saudi Aramco’s acceptances of term nominations for September lifting is due by Aug. 17, with sources expecting Japanese lifters to see deferments of two or three cargoes.
**Spot demand was seen from India, where state-run Hindustan Petroleum Corp. Ltd. is due to award a tender on Aug. 17, seeking 45,000 mt of evenly-split cargo and a parcel of 8,000 mt propane and 12,000 mt butane for October delivery.
**Supply from the US is expected to be healthy for loadings in August and September to meet steady Asian demand.
Source: Platts