Asia octane: Key market indicators for Jan 10-14

Asia's octane blendstocks are expected to see some support from MTBE, toluene and isomer-mx complexes in the Jan. 10-14 trading week, while naphtha and ethanol remain on the backfoot.

At 0400 GMT Jan. 10, ICE March Brent crude futures stood at $81.91/b, down 0.44% from the close of Asian trade on Jan. 7

Naphtha

** Asian naphtha is expected to remain weak as key olefin and aromatics margins rest below breakeven levels. However, a firm gasoline market might support naphtha blendstock demand.

** Downstream weakness was evident as key CFR Taiwan/China paraxylene and C+F Japan naphtha cargo spread remained below typical breakeven of around $280-$300/mt; likely to keep splitter run rates low, sources said.

** Gasoline gains outpaced naphtha as the reforming spread widened 27.59% week on week to $11.19/b at the Asian close on Jan. 7, Platts data showed. The widened spread is likely to support naphtha blendstock demand as it is economically viable for gasoline producers to use naphtha as a blendstock.

MTBE

** FOB Singapore MTBE is expected to be on an upward trajectory in tandem with rebounding gasoline and crude oil markets this week amid abating fears of the omicron variant and improving sentiment.

** MTBE demand from major buyers like Malaysia is projected to improve. Malaysia resumed purchasing MTBE from November, importing 25,009 mt from Singapore.

**Against the firmer MTBE, downstream methyl methacrylate production margin from MTBE is projected to be weak, estimated at around minus $195.65/mt as of Jan. 7, Platts data showed.

Toluene

**China toluene prices to continue leading the rise in Northeast Asia and Southeast Asia amid strong domestic prices ahead of the Lunar New Year holidays starting end-January. Prompt ex-tank supplies were assessed at Yuan 5,860/mt Jan. 7, up Yuan 260/mt ($40.81) from a week ago, while CFR China was up $36/mt at $772/mt.

**There are some February cargoes available, but securing ships has become the main problem facilitating trades as buyers seek CFR basis and sellers offer FOB basis.

**India buying slows but Singapore and Vietnam continue to source for very prompt delivered cargoes, sources said. Singapore buying for gasoline blending, while Vietnam's inventories remain low, hence the need to cover prior to the month-end holidays, sources said.

Isomer-MX

**While isomer-MX demand from downstream paraxylene sector is expected to be weaker in Q1 due to scheduled maintenance and turnaround, MX prices are likely to remain strong this week as buyers may look to fulfill their needs ahead of the Lunar New Year holidays.

**MX is expected to take direction from oil prices, which may stage a recovery as concerns related to the omicron variant starts to fade, and amid a tightening global stock situation.

Ethanol

** US ethanol delivered to the Philippines fell to $647.67/cu m Jan. 7 against $709.33/cu m Dec. 31.

** US ethanol trading thin, while low demand caused values to slip further.

** COVID-19 cases climbing daily in the Philippines. A source said a lockdown, which is possible, will dampen ethanol demand, but not as severely as 2020.

** Offers for February shipment was heard at $890/cu m CFR Philippines.