12 Jul 2022 | 05:16 UTC

ASIA LIGHT ENDS: Key market indicators for July 12-15

Highlights

The physical C+F Japan naphtha marker slumped $14.50/mt from the Asian close July 8 to $804.50/mt in mid-morning trading July 12 due to lower crude oil futures.

The paper market structure remains firmly in a backwardation, while the sentiment was stable, as brokers pegged the front month July-August Mean of Platts Japan naphtha swap timespread at $11.50/mt mid-morning July 12, unchanged from July 8, S&P Global Commodity Insights data showed.

Demand for heavy full-range naphtha has picked up slightly since the week ended July 8 due to healthy aromatics margins to naphtha. Japan's Maruzen and South Korea's Hanwha Total emerged July 8 to buy spot heavy full-range naphtha.

The spread between the CFR Taiwan/China paraxylene marker and CFR Japan naphtha physical was assessed down $5/mt on the day at $373.50/mt at the Asian close July 8, well above the typical breakeven level of about $280-$300/mt.

Cracker feed naphtha demand will likely remain poor on bearish olefin production margins from naphtha and low run rates at olefin producers. Market sources said there was chatter about the olefins industry heading for a recession.

The spread between CFR Northeast Asia ethylene and CFR Japan naphtha physical was at $101/mt at the Asian close July 8. The spread has been below the minimum breakeven level of $250/mt for integrated producers to make ethylene from naphtha since May 13, S&P Global data showed.

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Asia's light ends markets began the July 12-15 week on an upbeat note for gasoline, with Indonesia and Malaysia still in festive mood and relaxed COVID-19 movement curbs spurring travel.

Naphtha and LPG sentiment has been dampened by weaker crude oil futures, though heavy full-range naphtha demand is edging up on improving aromatics margins against naphtha.

Naphtha

Gasoline

  • Asia's gasoline complex is expected to strengthen over July 12-15 on increased demand from Indonesia and Malaysia post Eid al-Adha festivities, and relaxed COVID-19 restrictions in regional economies, market sources said.
  • Mobility was high in Malaysia throughout the festive weekend, market sources said.
  • Brokers pegged the front-month FOB Singapore 92 RON gasoline crack against the Brent swap at $17.40-$17.45/b at 0300 GMT July 12, strengthening from $15.76/b at the Asian close July. 8, S&P Global data showed.
  • Cambodia eased COVID-19 restrictions as of July 11 and no longer requires unvaccinated travelers to quarantine upon arrival, local media reported.

LPG

  • Saudi August CP propane swaps were indicated at $708/mt July 12, down from $709/mt July 8 and $17/mt below the July term contract prices.
  • The August butane CP swap was indicated at $5/mt below propane, compared with $4/mt below propane in the previous session.
  • Traders said butane's deepening discount to propane was due to poor Asian butane demand.
  • Commercial propane demand in China could be hit by movement restrictions in several cities, including Xi'an and Lanzhou, and worries about fresh lockdowns in Shanghai following a rise in COVID-19 cases, but traders do not expect the situation to have much operational impact on propane dehydrogenation plants.
  • The overall market sentiment appears somber, with the August-September CP propane swap contango indicated at 2.5/mt July 12, widening from $1/mt in the previous session.
  • Abu Dhabi National Oil Co. is expected to soon announce acceptances of August-lifting term cargo nominations after July acceptances saw no cuts and delays, though some lifters had loadings advanced to earlier dates.