Asia octane: Key market indicators for March 7-11

Demand for Asian gasoline and its blending components was expected to rise over March 7-11 as Malaysia and Indonesia seasonally stockpile gasoline ahead of Ramadan.

Interest in blending was increasing in the Straits as high gasoline prices encourage countries like Singapore to increase their focus on gasoline blending, market sources said.

Sentiment has strengthened as the Russia-Ukraine conflict escalates and the threat of further sanctions on Russia looms. The key spread between FOB Singapore 92 RON gasoline cargo and swaps values widened to average $2.85/b in the week to March 4 from $1.29/b the week before.

At 0239 GMT March 7, May ICE Brent crude oil futures were up more than 15% from the previous Asian close March 4 at $127.99/b.

Naphtha

** Supply tightness in the Asian naphtha complex was expected to ease over March 7-11 as Western arbitrage lanes started to open, but the demand outlook was mixed as olefin margins narrowed while the Singapore reforming spread widened from the week before.

** Demand for naphtha as a steam cracker feedstock was weighing on olefin margins. The key CFR Northeast Asia ethylene to C+F Japan naphtha spread narrowed $82.375/mt week on week to $236.875/mt at the Asian close March 4, S&P Global Commodity Insights data showed. The slim spread is well below typical breakeven levels of $300-$350/mt and likely to force steam cracker operators to reduce run rates.

** However, blendstock demand for naphtha was likely to improve as the reforming spread widened 30.96% day on day to $12.90/b at the Asian close March 4, Platts data showed. The widened spread makes it economically viable for gasoline producers to use naphtha as blendstock.

** Downstream weakness was evident in the aromatics sector as the key CFR Taiwan/China paraxylene to C+F Japan naphtha cargo spread narrowed $4.375/mt week on week to $197.875/mt at the March 4 Asian close, well below the typical breakeven level of $280-$300/mt, and likely to reduce splitter run rates.

MTBE

** The Asian MTBE market was likely to fluctuate over March 7-11 due to the Russia-Ukraine conflict and volatility in the energy complex. Asian MTBE tumbled $47/mt day on day to $1,174/mt FOB Singapore on March 4 from a more than 9-year high March 3, but surged $154/mt week on week.

** MTBE blending demand in Southeast Asia was seen to be increasing. Vietnam imported MTBE from Singapore, the Asian gasoline blending hub, for the first time in five months in January. Vietnam's MTBE imports from Singapore in January totaled 1,905 mt, latest customs data showed.

** Malaysia's Pengerang Refining and Petrochemical, or PRefChem, has delayed the restart of its new 750,000 mt/year MTBE plant at the RAPID refinery to the second quarter from earlier plans to restart in Q1.

Toluene

** Asian toluene prices were likely to move up in line with upstream oil prices over March 7-11, and most market participants are expected to opt for floating prices over fixed prices to reduce the risk from price fluctuation.

** Demand from India was likely to be strong over March 7-11, given the tight supply from the Middle East and Northeast Asia, while Southeast Asia is likely to be balanced, with most cargoes sold via term contracts. End-users are likely to avoid the spot market due to the uncertain outlook upstream.

Isomer-MX

** Sentiment in the isomer-grade mixed xylene market was set to remain bullish in the week amid the Russia-Ukraine conflict and potential for additional sanctions on Russia.

** Market activity continues to be supported with strong interest for April cargoes amid supply tightness.

** The prices surge in the isomer-MX market in the week to March 4 mirrored the gains upstream in both crude futures and naphtha prices.

Ethanol

** Ethanol buyers in the Philippines were expected to remain on the sidelines over March 7-11 amid soaring ethanol prices across the Pacific.

** Offers for May arrival stood at $720/cu m CFR Philippines, up from $700/cu m a week earlier. Easing pandemic restrictions were raising expectations of increased demand for ethanol and gasoline in the country.

** US ethanol delivered to the Philippines increased to $761.67/cu m March 4 from $687/cu m a week earlier.

** Strengthening corn values also continued to support US ethanol prices.