Asia octane: Key market indicators for Jan. 3-7

The sentiment in the Asian market for octane blendstocks is expected to be mixed in the Jan. 3-7 week amid some support from the MTBE and toluene complex.

ICE March Brent crude futures stood at $78.01/b at 0300 GMT Jan. 3, down 1.43% from the close of Asian trade on Dec. 31.

Naphtha

**Asia's naphtha market saw narrowed margins over the tail end of the year, however tightness in the West boosted sentiment buoying the physical crack to a seven-week high.

**The Singapore reforming spread -- the difference between Singapore 92 RON gasoline and Singapore naphtha derivative -- narrowed by 81 cents/b day on day to $8.77/b on Asian close Dec. 31 due to gains in naphtha, Platts data showed. The narrowed gap is expected to weigh on demand for naphtha in gasoline blending.

**The CFR Japan naphtha physical crack against front-month ICE Brent crude futures rebounded $12.60/mt week on week to $154.45/mt at the Dec. 31 Asian close, a level last higher on Nov. 15 when it was $157.875/mt, Platts data showed.

**Shipping delays in Europe and US typical of the winter season had capped arbitrage shipments of naphtha to Asia, supporting the recovery in the January-February MOPJ naphtha swap timespread, which had widened $1.25/mt week on week to $11.50/mt at the Dec. 31 Asian close, Platts data showed.

**Margins in the aromatics sector were thin but saw an uptick last week, as the PX CFR Taiwan/China marker and the C+F Japan naphtha cargo spread rose $1/mt week on week to $150.33/mt at the Dec. 31 Asian close, Platts data showed. The spread had been below the typical breakeven of around $280-$300/mt during Q4 2021, which was a bearish factor for splitter run rates, sources said.

MTBE

**Asian MTBE is expected to be buoyed by the bullish sentiment in the Omicron-resistant energy sectors this week amid thin spot market discussion continued in the MTBE market.

**The MTBE gasoline blending value remained in the positive terrain, being estimated at around $160.5132/mt as of Dec. 31.

**Meanwhile, the rising new MTBE supplies in the region are expected to weigh on the market sentiment. South Korea's Hyundai Oilbank was heard to ramp up its runs at 90% of the capacity as of Dec. 31.

Toluene

**Asian toluene prices are expected to see more support this week as inventories fall week on week in China. According to estimates Dec. 31, the toluene port inventory in East China was down 7,000 mt to 36,000 mt in ex-tanks while in the South, the inventories were at a low of 6,000 mt, down 3,000 mt from the week before, trading sources added.

**Demand is expected to pick up ahead of the Lunar New Year closures from the end of the month around Southeast Asia and North Asia. Most January cargoes have been well-placed ahead with South Korean cargoes mostly kept in the domestic market for blending and for toluene disproportionation, or TDP, as benzene demand remained relatively firm and prices were relatively attractive.

**Singapore, India and Vietnam were also heard sourcing for prompt and spot delivered cargoes, improving the outlook for toluene in the short run, sources said.

Isomer-MX

**The near-term outlook for the isomer MX market remained weak on the back of upcoming downstream maintenances at Formosa, Sinopec Hainan and Japan's Mitsubishi Gas Chemical.

**While some tightness is seen in January, overall supply is expected to be higher than demand in Q1 and Q2 of 2022, according to market sources.

Ethanol

**Demand for fuel ethanol among Asian countries was muted, though buying intention was heard from India for the late Q1.

**Meanwhile, COVID-19 cases were climbing daily in the Philippines. The government has put Metro Manila on the third-highest level of alert from Jan. 3-15, which means services like restaurants and churches will open at lower capacities, local media reported. Ethanol demand could be hit going forward should cases mount and the government further tighten restrictions.

**US ethanol delivered to the Philippines fell slightly to $709.33/cu m on Dec. 31 from $719/cu m on Dec. 24.

**US ethanol trading was thin and values drifted lower during the last week of 2021.