Asia light ends: Key market indicators for Jan 10-14

Asia's light ends markets were largely softer Jan. 10 than the week before, with gasoline demand sentiment dampened by lingering concerns over the impact of the omicron variant on mobility, while steam cracker demand for naphtha was being curtailed by bearish olefins and aromatics sectors, though this could be offset in the coming week by the viability of naphtha as a gasoline blendstock.

LPG could see support from severe winter cold snaps in both the West and in Northeast Asia, while China's propane demand could see support from some propane dehydrogenation plants starting to return from maintenance.

Front-month March ICE Brent crude futures stood at $81.92/mt at 0438 GMT Jan. 10, down from $82.43/b at the Asian close Jan. 7.

Gasoline

** The February FOB Singapore 92 RON gasoline swap dipped slightly in early trade Jan. 10, pegged notionally lower at around $90.70/b at 0200 GMT, down 0.48% from the previous session, S&P Global Platts data showed.

** Demand-side fundamentals remain clouded. In Australia, the rampant spread of the omicron variant has seen daily infections hit record highs and surpass 1 million COVID-19 cases Jan. 10, the health ministry reported. COVID-19 restrictions, such as closing nightclubs and limiting dining capacity at restaurants, were being reinstated in the populous eastern states of New South Wales and Victoria in a bid to curb the spread.

** Driving activity in Australia fell to 2.08% below baseline levels Jan. 8; the month-to-date average was 9.8% above baseline levels, latest Apple mobility data showed.

** Increasing gasoline supply in the region was reflected in Singapore's light distillate stocks rising 13.53% month on month to a three-month high of 13.062 million barrels Jan. 5, Enterprise Singapore data released late Jan. 6 showed, as net gasoline exports tumbled 71.39% over the same period to a two-week low of 120,587 mt. Raising concerns of waning regional demand, exports to Indonesia, Southeast Asia's top gasoline buyer, fell 55.81% on the week to 118,110 mt, the data showed.

** In its first batch of 2022 oil product exports comprising gasoline, gasoil and jet fuel, China slashed quotas by 56% on the year, leaving only 13 million mt. Market participants said China's export supply outlook was expected to remain weak as the country would opt to channel barrels inward ahead of the Winter Olympics and Lunar New Year holidays,

Naphtha

** The physical C+F Japan naphtha marker rose $2.50/mt from the previous Asian session to $746.375/mt in mid-morning trade Jan. 10.

** Stable sentiment was reflected in naphtha swaps, with brokers pegging front-month February-March Mean of Platts Japan naphtha swap time spread at $8/mt in mid-morning trade Jan. 10, unchanged from the previous close, Platts data showed.

** But Asia's naphtha complex was expected to see continued bearishness in the olefins and aromatics sectors as key margins are below breakeven levels. However, a widened reforming spread is likely to support demand for naphtha as a blendstock.

** Steam cracker feedstock demand for naphtha is expected to remain sluggish as the key CFR Northeast Asia ethylene to C+F Japan naphtha spread narrowed $62.50/mt day on day and $40.625/mt on week to $231.375/mt at the Asian close Jan. 7, Platts data showed. This was well below the typical breakeven level for non-integrated producers of $350/mt and could prompt some steam crackers to reduce run rates, sources said.

** Weak downstream sentiment remained evident as the key PX CFR Taiwan/China to C+F Japan naphtha cargo spread rested at $199.045/mt, well below the typical breakeven of around $280-$300/mt at the Jan. 7 Asian close. The slim margin is likely to keep run rates in splitters low, sources said.

** Gains in the gasoline complex outpaced that of naphtha as the reforming spread – the difference between Singapore 92 RON gasoline and Singapore naphtha derivative – widened 27.59% on the week to $11.19/b at the Asian close Jan. 7, Platts data showed. The widened spread is likely to support naphtha blendstock demand as it is economically viable for gasoline producers to use naphtha as a blendstock. The spread swung to an eight-month high of $11.42/b at the Asian close Jan. 6; it was last higher on April 21, 2021 at $11.44/b, Platts data showed.

LPG

** Asian LPG demand for heating is expected to rise as China experiences a severe cold snap, trade sources said.

** Front-month February propane CP swaps were indicated at $741/mt Jan. 10, unchanged from the previous session and $1/mt above January term CP.

** The February-March propane CP was pegged at a $30/mt backwardation Jan. 10 versus $29/mt backwardation the previous session, while March-April was indicated at a backwardation of $33.50/mt, versus $33/mt the previous session.

** The February butane swap was indicated $6/mt below propane in mid-morning trade Jan. 10, narrowing from $10/mt at the previous Asian close. Trade sources said Asian butane prices may be tracking the strengthening butane complex in the US, where there were also winter storms.

** Abu Dhabi National Oil Co. or ADNOC, is expected to announce acceptances of February-loading term cargoes early in the Jan. 10 week, followed by Saudi Aramco early next week.