Asia octane: Key market indicators for Aug 23-27

The Asian octane complex is likely to remain in bearish territory in the Aug. 23-27 trading week, as regional fundamentals across all products have been negatively impacted by the ongoing spread of the COVID-19 delta variant across Asia.

The Asian naphtha complex could receive some near-term support due to a stronger European market, though sliding demand for naphtha in Asia will likely cap overall gains.

Naphtha

** The Asian naphtha market is slated to firm over Aug. 23-27, tracing a rebound in the European naphtha market after Asia's market close in the week to Aug. 20.

** Fundamentals in Asia have started to see some weakness, with a drop in demand for naphtha as a petrochemical feedstock for October delivery having pushed cash differential for spot cargoes delivered to Japan to over an eight-month low on Aug. 20, S&P Global Platts data showed.

** The cash differential for spot naphtha parcels with minimum 65% paraffin content was also assessed at parity at the Aug. 20 Asian close, down $5.50/mt on the week, against benchmark Mean of Platts Japan naphtha physical on a CFR Japan basis, Platts data showed. The cash differential was last at this level on Dec. 10, 2020, the data showed.

** Meanwhile, the FOB Singapore naphtha cargo -- which is a netback from benchmark C+F Japan naphtha and is a key value for gasoline blenders -- fell $6.71/b week on week to $64.92/b Aug. 20, amid a $1.84/mt rise in the Singapore-to-Japan Medium Range tanker naphtha freight netback to $22.09/mt, Platts data showed.

MTBE

** The Asian MTBE complex will likely remain on a downtrend in the week of Aug. 23, with sluggish demand due to the delta variant still weighing on fundamentals.

** Lackluster demand is likely to remain on the forefront of participant's minds, with the delayed commercial startup of Malaysian Pengerang Refining and Petrochemical's new 750,000 mt/year MTBE plant in August having only a limited impact.

** Adding some near-term pressure as well, India's Haldia Petrochemical Ltd. was heard to have plans to restart its MTBE plant in Haldia early-September after a month-long scheduled maintenance.

Toluene

** Bearish fundamentals will likely weigh on the Asian toluene market over Aug. 23-27, with selling pressure recently seen emerging from South Korea.

** On the demand side, some India-based importers said pre-festive sales were weaker-than-usual. Term buyers, particularly in the Vietnam market, were also heard requesting sellers to re-divert their cargoes elsewhere.

** The domestic Chinese toluene market was also heard to have been stable-to-weaker, thereby pressuring domestic east China prompt ex-tank prices to be assessed lower. With the China's toluene price relatively weak, sellers were heard having export intentions.

Isomer-MX

** The Asian isomer-MX complex is likely to remain under pressure as the spread to paraxylene has narrowed in recent weeks.

** In addition, the October regional supply and demand balance is expected to be longer than September due to maintenance shutdown at end-users' facilities.

** With the isomer-MX complex staying weak and should prices stay low following the steep decline last week, arbitrage from South Korea and Japan might open up if domestic Chinese MX prices remain stable-to-firm, sources said.

Ethanol

** The Asian ethanol complex is expected to stay bearish over Aug. 23-27, with demand from the Philippines likely to stay muted despite the easing of lockdown restrictions in Metro Manila on Aug. 20. The country reported a record 16,797 cases of new COVID-19 infections on Aug. 20, raising concerns that another lockdown could happen.

** In addition to poor Asian demand, lower corn values in the US on the back of mild weather forecasts for the US corn belt and slumping prices in other grain and oilseed markets have also injected additional weakness into the ethanol market, sources said.

** US ethanol delivered to the Philippines edged lower to $656/cu m on Aug. 20, down from $664/cu m on Aug. 13, Platts data showed.