Asia octane: Key market indicators for July 5-9

The Asian octane market will widely remain supported in the week of July 5-9, with tight European supply bolstering the low-octane naphtha complex. On the high octane blend stock front, a stronger Asian gasoline complex as well as healthy benzene and paraxylene margins are expected to keep MTBE and toluene prices buoyed.

Meanwhile, the Asian ethanol complex is expected to see muted trading over July 5-9, especially since buyers in the Philippines have reportedly completed purchases for the third quarter of 2021.

Naphtha

** The Asian naphtha complex is expected to remain firm over July 5-9, with the current second-half August buying cycle taking strength mainly from tighter supply in the European naphtha segment, market sources said.

** The key CFR Northeast Asia ethylene spread to benchmark C+F Japan naphtha cargo rose to $294/mt on July 2, above the typical breakeven of $250/mt for integrated producers, market sources said.

** The Singapore reforming spread -- the difference between Singapore 92 RON gasoline and Singapore naphtha derivative -- narrowed to $9.25/b July 2 from $9.57/b on June 25 on the back of higher FOB Singapore naphtha prices, S&P Global Platts data showed.

** FOB Singapore naphtha cargo -- assessed as a netback to C+F Japan naphtha cargo -- was also assessed at a multi-year high of $75.17/b on July 2, up $2.30/b week on week. It was last higher on Oct. 17, 2018, at $75.70/b, Platts data showed.

MTBE

** The Asian MTBE complex will likely continue to rally on the back of a stronger Asian gasoline complex, with the FOB Singapore MTBE marker having already hit a 21-month high on July 2 at $800.50/mt, Platts data showed.

** Although MTBE demand from blenders of Malaysian and Indonesian gasoline have remained low due to the current COVID-19 restrictions, China has stepped up as the buyer of spot MTBE, according to industry sources.

** Around 3,000 mt of MTBE from Southeast Asia for loading over H1 July was seen heading to Zhoushan, China, according to shipping data.

Toluene

** Asian gasoline blenders are likely to continue staying away from the use of toluene over July 5-9, with lofty toluene prices making the use of the blendstock uneconomical.

** Prices of toluene, in fact, are expected to stay supported in the week of July 5-9, with a healthy benzene and paraxylene margin against toluene supporting mainstream demand, market sources said.

** FOB Korea toluene physical marker, of note, hit a three-week high of $746/mt on July 2, the highest since June 11 at $7.51/mt, according to Platts data.

Isomer MX

** The Asian isomer mixed xylenes market will likely be mixed in the of July 5-9 week, with industry participants looking for directional cues amid diverging supply-demand dynamics.

** Healthy demand from the paraxylene market has buoyed current sentiment in the isomer-MX complex while on the supply-side, evidence of growing domestic inventories in east China have capped the complex's upward momentum.

** Domestic inventories of isomer-MX in east China was recorded at a 10-week high of 70,400 mt in the week ended July 2, the highest since the week ended April 16 at 82,800 mt, Platts data showed.

Ethanol

** Demand in the Asian ethanol complex is likely to remain muted over July 5-9, with Q3 2021 cargo requirements having already been met by buyers in the Philippines, industry sources said.

** Imported ethanol cargoes for Q3 2021 will start landing in late-July and early-August. The imported cargoes would meet rising gasoline and fuel ethanol demand in the Philippines, which according to industry sources have reached near pre-pandemic levels in early-July.

** Outside Asia, strong corn values are also set to lift ethanol prices. The US Department of Agriculture's quarterly grain stocks report released June 30 updated US corn planted area for the 2021-22 marketing year (September-August) at 92.69 million acres, lower than average market expectations of 93.8 million acres.