Asia octane: Key market indicators this week

Singapore — The strength of the Asian gasoline market will be the main support for the region's octane over April 5-9, as gasoline blending activity increases -- a boost for blendstocks MTBE and naphtha -- following the easing of movement restrictions, while regional refinery outages boost gasoline fundamentals.

Other components such as toluene, isomer-mx and ethanol are mired in heavy supply, with waning demand adding to the weakness.

MTBE

**The Asian MTBE market is expected to be driven by a firmer regional gasoline complex this week, as the upward momentum in prices and demand for higher octane gasoline leaves MTBE the blending component of choice.

**Asian MTBE prices, as a result, was assessed at $712/mt FOB Straits on April 1, $19/b mt higher than on March 26, Platts data showed.

**Nevertheless, some immediate headwinds could emerge downstream as fundamentals in Asia's methyl methacrylate, or MMA, market are stable-to-weak after retreating from earlier highs. The April 5-9 outlook for the MMA complex, however, is expected to frim H2 April onwards due to the upcoming heavy turnaround season, sources said.

NAPHTHA

**The Asian naphtha market is expected to soften this week ending April 9, as Western supply flows resume following the unblocking of the Suez Canal. The impact of the resumption of the arbitrage flow was evident from the dip in the Asia naphtha physical crack spread against ICE Brent crude futures, which fell to $90.40/mt on April 1, down $1.83/mt day on day, Platts data showed.

**Due to lower naphtha values, the spread between CFR Taiwan/China paraxylene and CFR Japan naphtha physical rose $9.09/mt week on week from March 25 to stand at $240.67/mt on April 1, staying below the typical breakeven range of $280-$300/mt.

**The strength in Asian gasoline has spurred blending activity, industry sources said. The Singapore reforming spread, which is calculated as a difference between FOB Singapore 92 RON gasoline and FOB Singapore naphtha derivative, stood shy of the one-year high of $9.66/b on April 1, Platts data showed.

TOLUENE

**The Asian toluene market is expected to face further downward pressure this week April 5-9, as demand from the solvents sector has plateaued, while requirement from the toluene disproportionation stream is mixed. Supply is expected to lengthen further this week, market sources said, adding further downside to the blendstock.

**In light of the higher price of blendstock MTBE, toluene is the choice blendstock for gasoline blending.

**The FOB Korea toluene marker reflected the softer outlook, dipping to $678/mt on April 1, from $680/mt a week prior, Platts data showed.

ISOMER-MX

**Sentiment in the ISOMER-MX complex is expected to soften this week, after Asian Contract Price negotiations for PX failed to reach a settlement for April.

**Combined with already weak fundamentals in the downstream paraxylene market, the FOB Korea marker fell $19/mt over the week ended April 1 to be assessed at $714/mt on April 1, Platts data showed.

ETHANOL

**The Asian ethanol market will draw support from non-Asian factors this week, as US corn prices, which ethanol prices typically trace, having been on an uptrend.

**The uptrend was a result of the US Department of Agriculture's prospective plantings report which pegged the corn acreage for the 2021 crop at 91.144 million acres, well below market's expectations. The higher price of corn therefore led US ethanol delivered to the Philippines being assessed at $588/cu m on April 1 against $569.67/cu m on March 26, Platts data showed.

**That said, a lengthy domestic lockdown and rising COVID-19 infections have contributed to thin demand from the Philippines, sources said. Offers were seen at $580/cu m CFR Philippines in the week ended April 1, rising to around $615-$620/cu m for June at the close of the week.