Asia octane: Key market indicators for Jan 17-21

Asia's octane blendstocks are facing headwinds in the Jan. 17-21 trading week from poor naphtha, isomer-MX and ethanol demand, while volatile crude values and increasing MTBE supply are expected to dent sentiment further.

At 0405 GMT Jan. 17, ICE March Brent crude futures stood at $86.13/b, up 1.39% from the close of Asian trade on Jan. 14.

Naphtha

** Naphtha purchasing activity for H1 March delivery into North Asia is slated to begin this week, as the trading cycle rolled forward on Jan. 16.

** Sentiment was bearish as slim olefin and aromatics margins dampened demand, however, an uptick in the reforming spread could attract gasoline blending demand.

** Downstream weakness narrowed the key paraxylene CFR Taiwan/China marker and the C+F Japan naphtha cargo spread by $11.625/mt on the week to $187.42/mt Jan. 14, Platts data showed. It was still below the typical breakeven of around $280-$300/mt and likely to keep run rates at splitters low, sources said.

** Gasoline gains outpaced naphtha as the reforming spread, the difference between Singapore 92 RON gasoline and Singapore naphtha derivative, widened 21 cents/b week on week to $11.40/b at the Asian close Jan. 14, Platts data showed.

MTBE

** Asian MTBE is expected to fluctuate amid active trading after the long year-end holidays.

** Rising MTBE supply might weigh on sentiment. South Korean refiner Hyundai Oilbank has ramped up runs at its new 200,000 mt/year MTBE plant in Daesan to full capacity. The first batch of around 4,000 mt of MTBE was heard to have been shipped to China.

**Downstream, methyl methacrylate production margin, from MTBE, is likely to remain in the red due to the relatively weaker MMA market.

Toluene

** South Korea's toluene exports fell 40.2% on the month to 16,356 mt in December, according to the latest data released by South Korea's Customs and Trade Development Institute. This will likely continue to support prices as FOB Korea prices are expected to rise $38/mt week on week, while CFR China prices climbed $33/mt over the same period.

**The bulk of toluene produced in the country remained in the domestic market for blending, or for toluene disproportionation, or TDP, as benzene demand was firm and prices relatively attractive.

**CFR China toluene prices have been propped up by continued buying interest for any February delivery cargoes, amid tight Northeast Asian supply and high freight rates. The marker will hold up this week in the run up to the Lunar New Year holidays at end-January to early February.

**India, Singapore and Vietnam continue to source for very prompt delivered cargoes, although the cash differential above FOB Korea were heard lower, trading sources said.

Isomer-MX

**Overall isomer-MX demand looks to be stable to lower as operation rates for Asia's downstream paraxylene plants remain low due to poor economics and, in the case of China, in view of the upcoming 2022 Winter Olympics.

**MX is expected to take pricing cues from paraxylene and crude oil, which look set to rise on continued supply tightness as omicron concerns ease.

Ethanol

** In the Philippines, ethanol demand is expected to slip in Q1 as COVID-19 cases climb and tighter social restrictions are been imposed.

** Offers was heard at $890/cu m CFR Philippines for February delivery and $690/cu m for March delivery, reflecting a steep inverse between the two months.