Asia light ends: Key market indicators for Sept. 20-24

Asia's light end markets were mixed during mid-morning trade Sept. 20, as softer crude hampered gasoline and naphtha, while LPG sentiment was supported by global supply concerns and recovering Asian demand.

Gasoline was also pressured by concerns over transport movements due to the surge in the COVID-19 delta variant in China, while limited Western flows support naphtha, even as end-user demand is supported by positive olefin margins.

Front month ICE November Brent crude futures stood at $74.69/b at 0441 GMT Sept. 20, down 64 cents/b versus the previous close.

Gasoline

**October FOB Singapore 92 RON gasoline swap was pegged notionally around $81.44/b in early Sept. 20 trading, down 0.13% from the previous session, as rising COVID-19 cases and emergence of the delta variant in major cities dampened sentiment in the Asian gasoline complex.

**Increased delta variant cases changed the course of recovering gasoline demand. Participants are expected to closely watch global mobility, with rising cases in China casting a shadow on gasoline demand ahead of Mid-Autumn Festival and the Oct. 1-7 National Day holidays. The recent delta-variant outbreak in Fujian province was followed by another wave of fresh cases in Xiamen, prompting the government to announce new measures to curb the virus spread.

**Following a partial recovery from Hurricane Ida, which initially eased supply concerns, US gasoline supply from the US Gulf Coast refineries was subsequently disrupted by Tropical Storm Nicholas.

**Industry participants were also cautious about tapering summer gasoline demand in the US. The US RBOB-Brent crack at 0230 GMT Sept. 20 was at $16.14/b, up 1.69% versus the previous trading session.

Naphtha

**Naphtha C+F Japan cargo fell $1.75/mt versus the previous session to $695.125/mt mid-morning Sept. 20, on lower crude.

**The recent crude upswing had boosted benchmark C+F Japan naphtha to a seven-week high of $696.875/mt at the Sept. 17 Asian close, up $23.50/mt week on week, Platts data showed.

**Market sentiment is supported by tight Western arbitrage supply. Brokers pegged front-month October-November Mean of Platts Japan naphtha swap spread at $8/mt in mid-morning trade Sept. 20, 50 cents/mt wider versus the previous session, Platts data showed.

**End-user demand was firm from positive olefin margins, as the key ethylene-naphtha margin, closely tracked by steam cracker operators, climbed to a 15-week high on limited ethylene supply.

CFR Northeast Asia ethylene and C+F Japan naphtha spread grew $6.50/mt week on week to $413.125/mt at the Asian close Sept. 17, Platts data showed. The spread was above the typical breakeven of $350/mt for producers and may keep steam crackers operating at maximum capacity, sources said.

**Reflecting the supportive naphtha demand, the cash differential for spot naphtha parcels with minimum 65% paraffin content, gained $2.75/mt week on week to $7.25/mt Sept. 17, against benchmark Mean of Platts Japan naphtha physical, CFR Japan basis, Platts data showed. Levels were last higher Aug. 8 at $8.50/mt.

LPG

**Front-month October propane contract price swap was notionally indicated at $763/mt Sept. 20, up from $757.50/mt Sept. 17.

**This is $98/mt more than the September term CPs, just over a week before the October term CPs are due to be announced and keeping its move towards the fifth straight increase.

**October-November CP propane swap was indicated in a $3.50/mt contango, unchanged from the previous session, while November-December was indicated at a steady $6/mt backwardation Sept. 20.

**Asia's strength continued to get support from the uptrend in the USGC propane, where inventories were more than 25 million barrels below the same week year on year, while exports have held above 1 million b/d over 14 straight weeks through the week ended Sept. 10, the Energy Information Administration data showed.

**Even as North Asia is bracing for the start of winter heating demand, Chinese propane demand is expected to recover as Oriental Energy's third propane dehydrogenation plant has just returned from one-month maintenance, bringing online all three units. But Wanhua Chemical's units are shut for one month around mid-September.