Asia octane: Key market indicators for Aug 30-Sep 3

Fundamentals in Asian octane blendstock markets remained largely bearish Aug. 30, with the lingering impact of the pandemic continuing to take a toll on demand for ethanol, toluene and MTBE

However Asian naphtha could see some last-minute buying for H1 October delivery cargoes this week, with the window for the H2 October delivery cycle opening Sept. 1.

A wider paraxylene-mixed xylene spread could also provide a slight boost to MX demand in the week, although the overall isomer-MX complex remains dragged down by a weak domestic complex in China.

Naphtha

** The Asian naphtha market was expected to see the tail end of buying activity for H1 October deliveries this week as the trading cycle rolls to the H2 October delivery cycle on Sept. 1.

** Steam crackers were actively seeking H1 October delivery cargoes in the week ended Aug. 27, leading to cash differentials recovering from the eight-month low reached Aug. 23, S&P Global Platts data showed.

** The FOB Singapore naphtha cargo assessment -- a netback from benchmark C+F Japan naphtha and a key value for gasoline blenders -- rose $6.04/b week on week to $70.96/b Aug. 27 amid a $1.22/mt fall in the Singapore-Japan Medium Range tanker naphtha freight netback to $20.87/mt and a $54.125/mt rise in benchmark naphtha C+F Japan cargo over the same period, Platts data showed.

MTBE

** Fundamentals in the Asian MTBE complex were expected face downside pressure this week, with supplies heard to be rising from major exporter Taiwan due to lackluster local demand and higher operating rates.

** However outright prices were expected to remain firm due to strength in the wider oil energy complex amid a weaker US dollar.

** The uptick in outright prices was expected to close the Singapore-China MTBE arbitrage window, with FOB Singapore prices higher than China domestic MTBE prices.

Toluene

** The Asian toluene market is expected to remain tepid this week amid continuing weak fundamentals in the region.

** In China, poor domestic demand has seen local prices falling, while South Korea's importers were not seen in the market as producers keep toluene for their own TDP consumption.

** In Southeast Asia, Vietnam and Indonesia having pulled back from buying amid pandemic volatility and COVID-19 led logistics disruptions.

** While firmer sentiment was reported on the west coast of India due to tight inventories, 15,000 mt of toluene imports remain delayed, which could result in sharp buildups in port inventories and in turn reduce import flows moving forward, sources said.

Isomer MX

** A wider PX-MX spread was expected to support the isomer-MX complex this week, with the widened spread making MX more attractive to buyers. The spread widened to $118.17/mt on a CFR basis Aug. 27 from less than $100/mt a week earlier.

** Weak Chinese demand due to sluggish gasoline blending remains a concern among market participants, who noted that the outlook for October seems weaker than for September.

Ethanol

** Headwinds continue for the Asian ethanol complex, with poor fundamentals in the Philippines weighing on the blendstock.

** The Philippines' demand for gasoline was estimated to have fallen 20%-40% month on month in August due to fresh lockdowns in key regions such as Metro Manilla.

** The severity of the domestic demand destruction in the Philippines has prompted some domestic ethanol producers to halt production of fuel ethanol, with inventories in tanks full and oil companies delaying liftings, sources said.

** Data outside Asia was more supportive, with US ethanol production averaging 933,000 b/d in the week ended Aug. 20, the lowest since the week ended March 19, while US inventories fell by 335,000 barrels to 21.223 million barrels over the same period, Energy Information Administration data released Aug. 25 showed.