Asia octane: Key market indicators Aug 16-20

The Asian toluene market is expected to lead octane blendstocks during the week of Aug. 16-20 as heathy economics from toluene disproportionation plants continue to drive demand.

Meanwhile, the lingering impact of the spread of the COVID-19 delta variant still weigh on overall sentiment, with regional fundamentals for MTBE, ethanol and naphtha weakening.

Naphtha

** Asian naphtha is slated to begin trading H1 October delivery cargoes from Aug. 16 onwards following the half month roll.

** Cash differentials for spot paraffinic naphtha is expect to remain pressured by narrowing olefin margins, which have shrunk to $5.50/mt at the Asian close on Aug. 13 against the benchmark Mean of Platts Japan naphtha physical, on a CFR Japan basis, Platts data showed.

**The CFR Northeast Asia ethylene and CFR Japan naphtha physical spread has narrowed to $367.50/mt at the Asian close on Aug. 13, which although above the typical breakeven spread of $250/mt for integrated producers, was below the $300-$350/mt breakeven for non-integrated producers.

**The Singapore reforming spread -- the difference between Singapore 92 RON gasoline and Singapore naphtha derivative -- rose to $8.28/b on Aug. 13 as high freight decreased values for the FOB Singapore naphtha cargo. Although the widened spread may have resulted in better economics for gasoline blending, sources still note lackluster regional demand for the motor fuel as large parts of Southeast Asia remain under movement curbs.

MTBE

**The Asian MTBE complex is expected to weaken this week as rising MTBE supply as well as lackluster regional demand -- both the result of the lingering impact of the spread of the COVID-19 delta variant across Asia -- exacerbate prevailing downside pressures.

**Taiwan's Formosa Petrochemical Corp. was heard to have concluded its recent sell tender offering 10,000 mt of MTBE loading over H2 September at around low double-digit discount to Mean of Platts Singapore MTBE assessments, lower than its previous tender results, market sources said.

**Malaysia's Pengerang Refining and Petrochemical, or PRefChem, was heard to have delayed the restart of its new 750,000 mt/year MTBE plant at the RAPID refinery amid the weakened MTBE complex. Previously, the company was looking to restart the plant in August.

Toluene

**Asian toluene is likely to continue drawing support from consistent buying interest from South Korea this week. The increase in toluene demand stems from the sizeable spreads to both paraxylene and benzene, which have kept economics for toluene disproportionation plants favorable.

**A tight supply of ships in China and India have also added to the support on outright prices.

**The purchases of high octane blendstock for gasoline blending purposes remain dim amid uncertain regional gasoline demand, as well as unfavorable blending margins.

Isomer-mx

**Demand for MX in the gasoline blend pool is likely to remain a drag as domestic Chinese demand dips amid domestic movement curbs aimed at controlling the spread of a new outbreak of the coronavirus.

**MX prices remains buoyed by production issues at a North Asian producer, a narrowing spread between paraxylene and MX could likely see demand for PX production shift away from MX, sources added.

Ethanol

**Activity in the Asian ethanol complex is expected to stay muted this week, with most large buyers keeping to the sidelines as demand from the Philippines has slid due existing movement curbs.

**Support will likely stem from non-Asian factors, with positive production and corn data having edged ethanol prices higher through the week. US ethanol production averaged 986,000 b/d in the week ended Aug. 6, falling 27,000 b/d on the week, Energy Information Administration data showed on Aug. 11.

**Corn values were lifted amid a bullish US Department of Agriculture World Agricultural Supply and Demand Estimates report, which noted that the US' corn production in the 2021-22 marketing year (September-August) is estimated at 14.75 billion bushels, down from the previous estimate of 15.165 billion bushels in July.