Asia octane: Key market indicators for Sep 13-17

Asia's naphtha and toluene complexes are expected to lead octane blendstocks in the week starting Sept. 13. Asian naphtha will see lingering support from outages in the US Gulf Coast, which has impacted the supply of arbitrage cargoes, while South Asian demand for toluene will keep import appetites healthy.

MTBE, isomer-MX and ethanol will remain on the backfoot as Southeast Asian demand continues to suffer from ongoing movement curbs and poor blending activity.

Naphtha

**Asian naphtha is expected to see the tail end of buying activity for H2 October deliveries this week starting Sept. 13 as the trading cycle rolls to the H1 November delivery cycle on Sept. 16.

**Overall sentiment has firmed amid lingering supply tightness from the US Gulf Coast -- a source of arbitrage naphtha -- where refinery operations have yet to fully recover from the impact of Hurricane Ida. In addition, naphtha demand is expected to remain firm as steam crackers are likely to see healthy ethylene-naphtha margins this week.

**Positive ethylene production margins are likely to keep steam crackers operating at high levels to support demand for cracker-feed naphtha, sources said. The margin rose to a 15-week high of $406.625/mt on Sept. 10, Platts data showed. It was last higher on May 28 at $409.750/mt.

MTBE

**Asian MTBE will likely stay on a downtrend Sept. 13-17 as Chinese demand for the high-octane blendstock is still weak, while lingering oversupply in Southeast Asia add stress on fundamentals.

**Malaysia, which typically imports MTBE from Singapore, has switched to exporting MTBE to the city state. Market sources said lagging gasoline demand has lessened the need for blendstocks.

**MTBE supply from Taiwan are projected to increase in October as refiners ramp up run rates, while more Indian MTBE cargoes are expected in the market amid reinforced E10 compliance.

Toluene

**Asian toluene is expected to look toward South Asia for support Sept. 13-17 given India's tight supply and an upcoming festive period expected to lift import demand.

**Low domestic inventory and shipment delays due to tight vessel availability continue to hamper India's trading platform, an Indian trader said.

**Fundamentals in North and Southeast Asia are set to remain bearish. Chinese domestic toluene inventories remain high, while Southeast Asian markets are stressed amid COVID-19 restrictions, sources said.

Isomer-MX

**Asian isomer-MX is expected to stay bearish Sept. 13-17 with downstream turnarounds and weaker demand in the polyester chain leading to expectations of a lengthier October market.

**Focus will likely be on the PX-naphtha spread, market sources said. The sharp narrowing of the spread had spooked PX producers in the region, leading to softer demand for Asian isomer-MX for PX production.

Ethanol

**Fundamentals in the Asian ethanol complex are expected to stay bearish Sept. 13-17 as the import appetite of the region's major buyer, the Philippines, is still lackluster amid ongoing COVID-19 concerns.

**The demand uncertainty has led ethanol importers to seek supply domestically, rather than the region. Eyes are focused on whether the Filipino government will extend movement curbs this week, with the current round of restrictions in Manila expected to ease from Sept. 15 onwards.

**While fundamentals in Asia were bearish, bullish factors outside Asia could limit a sharp price decline. As of Sept. 9, the US' ethanol production was well below the 1 million barrel mark, while inventories were at its lowest since early June at 20.39 million barrels, the US Energy Information Administration data showed.