Asia’s light end markets firmed in mid-morning trade Aug. 30, on support from crude and concerns over the impact of Category 4 Hurricane Ida –- classified as one of the most powerful storms to ever hit the US Gulf Coast — on US oil, gas and refining production.
But gasoline is under pressure from increased Chinese exports in September, while soft demand for naphtha in Asia due to cracker maintenance is countered by tight supply.
LPG may be balanced between expectations of improving demand in India and a lull in North Asia, as the market awaits the release of Saudi Aramco’s September term contract prices.
Front-month ICE October Brent crude futures stood at $72.91/b at 0410 GMT on Aug. 30, up 21 cents/b from the previous close.
Gasoline
** September FOB Singapore 92 RON gasoline swap rose at the start of the trading week, pegged notionally around $79.80/b in early Aug. 30 trade, up 1.28% from the previous session..
** Western support came from Hurricane Ida, which was upgraded to a major Category 4 hurricane Aug. 29, the US National Hurricane Center said.
** Ida forced the shutdown of several key infrastructure, such as the partial closure of the Colonial Pipeline Lines 1 and 2 systems. Almost 4.4 million b/d of operating refinery capacity is in Ida’s path, primarily in Louisiana. At least half of that at-risk capacity came offline ahead of Ida with Phillips 66, Shell, ExxonMobil, Valero and others closing refining units.
** US RBOB-Brent crack at 0230 GMT Aug. 30 was at $25.11/b, up 5.04% and the highest since Aug. 6.
** However, fundamentals in Asia remain fragile. China was heard to have raised export volumes in September, with gasoline outflows in September anticipated to total 1.05 million mt, market sources said. State-owned PetroChina was estimated to export 450,000 mt of gasoline, while private refiner Zhejiang Petroleum & Chemical heard plans to export 200,000 mt.
Naphtha
** Naphtha C+F Japan cargo rose $4.50/mt from the Aug. 27 Asian close to $665.75/mt in mid-morning trade Aug. 30, boosted by a firmer crude complex.
** Front-month September-October Mean of Platts Japan naphtha swap spread pegged by brokers at $6.25/mt in mid-morning trade Aug. 30, down 25 cents/mt from the previous session, S&P Global Platts data showed.
** Asian naphtha is set to see the tail-end of buying activity for H1 October delivery in the week ending Sept. 4, as the trading cycle rolls into the H2 October delivery cycle Sept. 1.
** Following a resumption in purchasing last week, the cash differential for spot naphtha parcels with minimum 65% paraffin content rose from minus $2/mt on Aug. 23 to parity on Aug. 27, against benchmark Mean of Platts Japan naphtha physical on a CFR Japan basis, Platts data showed.
** Planned steam cracker maintenance has dampened Asia’s naphtha demand for October. But supply is expected to be constrained by a tight European naphtha market, whereas in Asia, LPG was economically unviable as an alternative cracker feedstock.
LPG
** Front-month September propane contract price swap was notionally indicated at $674/mt on Aug. 30, up from $670/mt Aug. 27.
** This is $14/mt more than the August term CPs, a day ahead of Saudi Aramco’s scheduled announcement of the September term CPs, in which lifters’ lowest recommendation for propane CP was $630/mt and the highest was $670/mt, for an average of $655, while butane was $5/mt below that. On Aug. 30, the September Saudi butane CP swap was indicated at $2/mt below propane.
** October-November CP propane swap backwardation was at $1.5/mt versus $2.5/mt the previous session.
** North Asian stock levels remain ample, limiting imports, and market is seeking support from India, on hopes of improving demand for upcoming festivals, even as movement restrictions are gradually eased as COVID-19 comes under control.
**Support is also expected from impact on LPG production and exports, and whether the hurricane season might also disrupt loading and shipping movements at LPG export terminals.
Source: Platts