Asia octane: Key market indicators for Aug 2-6

Asia's octane market will likely stay tepid this week ending August 6, as an upward trajectory in the wider crude oil complex resulted in outright prices of high-octane blendstocks toluene and MTBE staying lofty, souring appetite from blenders and end-users alike.

In addition, limited supply of arbitraged naphtha had also contribute to higher prices for low-octane blendstocks, which against a backdrop of poor Southeast Asian gasoline demand, have kept buyers on the sidelines.

Naphtha

**Focus in the Asian naphtha complex this week will lie on the move into trading for the H2 September delivery cycle. The half month roll could see a lag in buying activity from end-users who continue to drag their feet for purchases due to the volatile crude markers and high outright naphtha prices.

**The high naphtha flat prices are expected to remain, especially against the backdrop of limited supply from Western arbitrage cargoes. The benchmark C+F Japan naphtha cargo had been assessed at $701.25/mt at the close of Asian trade on July 30, up $19.63/mt week on week, Platts data showed.

**The high price of naphtha is also expected to weigh on olefin margins moving forward, albeit the key CFR Northeast Asia ethylene spread to C+F Japan naphtha cargo still holds above the typical $250/mt breakeven for integrated producers, having been assessed at $303.75/mt at the Asian close on July 30, Platts data showed.

Toluene

**Demand for toluene in Asia is expected to stay poor this week, with gasoline blenders and users in the solvent sector staying on the sidelines amid lofty outright prices.

**The FOB Korea toluene physical marker averaged $770.40/mt over July 26-30, rising from an average of $755.25/ mt in the previous week, mostly in line with stronger crude oil markets.

**In addition to lofty outright prices, movement restrictions in Southeast Asia have also pulled down demand from gasoline blenders, who noted that demand from high-octane gasoline buyers such as Malaysia will likely stay muted in the near term.

MTBE

**The Asian MTBE complex will likely stay rangebound this week, with growing sell interest from participants being balanced out by a firm crude complex.

**Still, supply-side headwinds are expected in the near term, with market participants eyeing the restart of Malaysia's RAPID refinery's 750,000 mt/year MTBE facility. The facility was heard to have planned for a restart in August, having stayed shut since March 2020 due to a fire, Platts reported earlier.

**Despite the limited demand for high-octane gasoline, the MTBE blending value is expected to remain in positive territory, having been seen at $147.18/mt as of July 30, Platts data showed.

Isomer MX

**The isomer-mx complex is likely to face headwinds this week, with a dearth of real demand in China contributing to cautious trading in the domestic East China market.

**Overall, CFR China bids for August/September delivery cargoes have been low, hovering at around $790/mt, while the CFR China marker was assessed at $833/mt on July 30.

Ethanol

**The Asian ethanol complex is expected to face headwinds this week, with major oil companies having heard to have planned to delay lifting as initially optimistic forecasted demand lagged actual consumption.

**Declines in US ethanol production could help to keep outright prices for ethanol firm, sources noted. Data from the US Energy Information Administration showed that US ethanol production fell for the third straight week to an average of 1.014 million b/d in the week ended July 23.

**Moreover, reports of frost in South America has also supported CBOT corn futures, with levels edging higher. US ethanol delivered to the Philippines was assessed at $664.67/cu m on July 30, up slightly from the $650.33/cu m assessed a week earlier on July 23.