Asia light ends: Key market indicators for Sep 27-Oct 1

Asia's light end markets strengthened in mid-morning trade Sept. 27, driven by a rally in the crude futures.

Gasoline demand was expected to rise in Asia on the back of higher driving activity and make up for lower demand in the US where the driving season was nearing a close, sources said. LPG demand was expected to be supported by higher heating demand in Asia during the winters, sources said.

Strong demand from steam crackers and healthy olefins margins were expected to lift naphtha demand in the face of limited arbitrage supply, sources said.

The Front month ICE November Brent crude futures stood at $78.99/b at 0413 GMT Sept. 27, down 91 cents/b compared with the previous close.

GASOLINE

** The October FOB Singapore 92 RON gasoline swap was pegged notionally at about $85.34/b in early Sept. 27 trade, up 1.9% from the previous session, S&P Global Platts data showed.

** A weakening US RBOB-Brent crack at $13.39/b, down 2.21% from the previous session at 0230 GMT Sept. 27, made market participants cautious. The crack hit a seven-month low of $13.58/b Sept. 23.

** The demand in the US tapered off following the Labor day holiday earlier in September, prompting US gasoline stocks to rise by 3.47 million-barrels to 221.62 million barrels in the week ended Sept. 17, data from the US Energy Information Administration showed.

** However, demand recovery in Southeast Asia was expected to support Asian gasoline, sources said. Meanwhile, India's Hindustan Petroleum Corp., sought, via a tender, up to 85,000 mt of 91 RON gasoline for delivery over Oct. 10-15, or over Nov. 1-10, from Mumbai, while Indian Oil Corp. sought up to 96,000 mt of 92 RON gasoline, or three cargoes of 30,000-32,000 mt each, for delivery over Oct. 7-8 to Chennai and Haldia, Chennai and SOJ Paradip, and Chennai, Platts reported earlier. The results of the tenders, which closed in the week ended Sept. 24, were not immediately known.

NAPHTHA

** The naphtha C+F Japan cargo rose $14.75/mt day on day to $725.875/mt in midmorning trade Sept. 27, from the Sept. 24 Asian close, due to higher crude prices.

** Th activity in Asia's naphtha market was picking up in the week started Sept. 27, as steam crackers emerged with tenders to purchase first-half November delivery cargoes, following a lull in buying due to the Mid-Autumn Festival holiday in the prior week.

** Brokers, however, pegged the front-month October-November Mean of Platts Japan naphtha swap spread at $6.25/mt in midmorning trade Sept. 27, narrower by 50 cents/mt from the previous session, Platts data showed.

** Tight arbitrage supply, healthy olefin margins and high LPG prices supported naphtha prices. The benchmark C+F Japan naphtha price reached a near three-year high of $711.125/mt at the Sept. 24 Asian close, up $14.25/mt week on week, Platts data showed. The price was last higher at $716.375/mt Oct. 10, 2018.

** The key ethylene-naphtha margin, tracked by olefin producers, climbed to a 17-week high, on tight ethylene supply. The CFR Northeast Asia ethylene and C+F Japan naphtha spread grew $6.50/mt on the week to $423.875/mt at the Asian close Sept. 24, Platts data showed. The spread was last higher at $454.75/mt May 25, and it remained above the typical breakeven of $300-$350/mt for non-integrated producers. That was likely to keep steam crackers operating at maximum capacity, sources said.

LPG

** The Front-month October propane contract price swap was notionally indicated at $777/mt Sept. 27, up from $764/mt, Sept. 24, Platts data showed. The swap was $112/mt above the September term CPs and put the October term CPs on track for the fifth straight month of gain, four days ahead of Saudi Aramco's scheduled announcement of the October term CPs.

** The October-November CP propane swap was indicated at a contango of $6/mt Sept. 27, compared with $5/mt in the previous session, while the November-December CP was indicated at a backwardation of 50 cents/mt, compared with $2.5/mt in the previous session.

** The November FEI propane swaps – indicating the CFR market – transacted at $822/mt in early trade Sept. 27, up from $804/mt on Sept. 24.** The premium of propane against butane was indicated at $12/mt Sept. 27, up $2/mt from the previous session, as North Asian buyers brace for lower temperatures over December-February. That could boost demand for heating fuel, including propane, during the peak months, sources said. Some of the Chinese propane dehydrogenation plants returning from maintenance were are expected to stoke feedstock demand for propane, sources said.