Asia light ends - Key market indicators this week

Singapore — Cold winter forecast for North East Asia is expected to boost heating fuel demand, including LPG, while Asia's gasoline sentiment is balanced between additional spot demand from India and Vietnam and shaky recovery in Indonesia due to extended lockdown measures.

Hopes of Australian gasoline demand as Melbourne is set to ease movement restrictions remained, while Asian steam crackers' healthy demand for high paraffin naphtha faces limited supply.

November ICE Brent crude futures stood at $41.72/b at 0300 GMT Sept. 28, down from $42.10/b at 0830 GMT on Sept. 25.

Gasoline

** October FOB Singapore 92 RON gasoline swap opened Sept. 28 around $46.70/b, steady versus previous session, as a sharp uptick in the US RBOB/Brent crack helped buoy somber sentiment in global crude markets.

** US RBOB/Brent crack seen at a month-to-date high of $9.23/b at 0230 GMT Sept. 28, up 12.63% on the day. Market participants attributed strength to US stimulus optimism, which will likely be supportive to motor fuel complex, encouraging greater domestic driving activity amid tightening US gasoline supplies.

** In Asia, sentiment remains fragile. The emergence of additional spot demand from India and Vietnam last week was supportive, but ongoing lockdowns in Southeast Asia's top gasoline buyer Indonesia, prolonged uncertainty Asia's recovery demand.

** Australia's second-largest city Melbourne is set to ease movement restrictions from Sept. 28. The city, which had imposed strict curfew measures end-June, will allow citizens to leave homes for activities such as exercises or purchase essential items. Another round of easing is expected from mid-October, should the number of coronavirus cases ease further, said local reports.

Naphtha

** Physical CFR Japan naphtha benchmark opened Sept. 28 at $402.875/mt, down $3.50/mt from the Sept. 25 Asian close on lower crude.

** CFR Japan naphtha physical crack spread against front month ICE Brent crude futures rose to an year-to-date high of $91.25/mt at Sept. 25 Asian close, up $11.125/mt (7.26%) on the day and $21.475/mt (30.78%) since Sept. 1, Platts data showed. The crack was last higher on Dec. 12, 2019 at $94.85/mt.

** Stable sentiment was reflected in the derivatives market in mid-morning trade, with front month October/November Japan naphtha swaps spread at plus $1.75/mt, unchanged from the Sept. 25 Asian close.

** Asian steam cracker demand for high paraffin content naphtha feedstock, as they sought to maximize olefin production, underpins market strength, and naphtha buyers faced with limited supply of high paraffin naphtha barrels, sources said.

LPG

** Front month October CP swaps notionally indicated Sept. 28 at $365.5/mt, versus $370/mt valued Sept. 25. Butane CP swap indicated $4/mt above propane.

** October/November CP propane swap contango was indicated at $17/mt versus $13.5/mt the previous session.

** Saudi Aramco is due to announce October Contract Prices Sept. 30, with traders expecting propane between $370/mt and $380/mt, while butane around $5/mt and $10/mt higher. With September CPs at $365/mt for propane and butane at $355/mt, the projection indicates propane resuming uptrend after September held steady, while butane will rise for second month.

** Market balanced between disruptions in US supply following hurricanes as well as India's Hazira gas plant fire, which could prompt more demand, and startup delays of new Chinese PDH plants that could delay fresh demand till year-end.

** Heating fuel demand in Japan and South Korea is rising on cold-winter forecast. Traders said South Korea already seeking LPG to leverage widening contango.

** Front cycle H2 October CFR North Asia differential to October CP, which switched to premium Sept. 24 for first time since Aug. 24, increased to $19/mt Sept. 25.