Asia octane: Key market indicators for March 14-18

Demand for Asian gasoline is expected to increase over March 14-18, supported by easing COVID-19 restrictions in regional economies, market sources said.

India has said that it will begin allowing international flights into the country in the second half of March, according to local media, possibly increasing demand for gasoline.

However, Interest in gasoline blending was heard to be decreasing, as crackers hold off from buying feedstocks due to poor margins, market sources said.

Sentiment has strengthened as the Russia-Ukraine conflict keeps escalating and the US continues to sanction Russian oil. The key spread between FOB Singapore 92 RON gasoline cargo and swaps values averaged $4.58/b in the week ended March 11 from $2.85/b the week before.

At 0307 GMT March 14, May ICE Brent crude oil futures were down 1.66% from the previous Asian close March 11 at $109.44/b.

Naphtha

**Asian naphtha demand was weak as steam crackers slashed operation rates, and few end-users had bought H2 April delivery cargoes even as the trading cycle was due to roll to H1 May on March 16.

**Yet, tight supply from limited Western arbitrage volumes and high crude prices had driven up prices to over a 13-year high of $1,058.625/mt on March 7. Benchmark naphtha C+F Japan cargo was last assessed at $1,019.625/mt on March 11 and has been above the $1,000/mt mark since March 2, S&P Global Commodity Insights data showed.

**Economics for naphtha as a gasoline blendstock were volatile as the reforming spread -- the difference between Singapore 92 RON gasoline and Singapore naphtha derivative – tumbled from a near seven-year high of $19.55/b to close the week at $13.65/b on March 11, S&P Global data showed. This was likely to weigh on naphtha demand for gasoline blending.

**Splitter run rates stayed under pressure as the aromatics sector was weighed down by weak downstream demand, with the key paraxylene CFR Taiwan/China marker and the C+F Japan naphtha cargo spread remained under the typical breakeven of around $280-$300/mt at $237.045/mt on the Mar. 11 Asian close, up $28/mt day on day, S&P Global data showed.

MTBE

** Asian MTBE is expected to continue to be volatile, amid fluctuating crude oil and gasoline prices in the wake of lingering Russia-Ukraine conflicts. Asian MTBE retreated to $1,125/mt on March 11, after it spiked to $1,345/mt FOB Singapore on March 7, hitting an all-time high since S&P Global launched the assessment in 1993.

** Due to the surge in the FOB Singapore MTBE prices, the arbitrage window to move MTBE from China to Singapore has widened sharply to date in March. Against this backdrop, Chinese blenders were heard to be considering hiking exports of MTBE to take advantage of the improved netback.

** Malaysian Hengyuan Refining Company Berhad was heard to have bought around 15,000 mt of MTBE for April at around low-$10s/mt premium to Mean of Platts FOB Singapore MTBE assessments.

Toluene

** Fundamentally, demand and supply are largely balanced with both sellers and buyers holding back as they wait for the market volatility to fall.

** Thin demand and higher inventories in the domestic China market ease spot requirements from the international market. Port inventory in east China was up 3,000 mt to 41,000 mt, from 38,000 mt ex-tank, a week ago, according to estimates from trading sources March 11. Inventories in the south remained unchanged at 22,000 mt from last week, the sources said.

** With the cuts to run rates in Southeast Asia, some Indian buyers were heard sourcing toluene from trading houses, although no firm bids or offers were reflected.

Isomer-MX

** Movement in Isomer-MX prices are set to mirror upstream price movements amid volatility. Uncertainty, as to where upstream prices will peak, are causing market participants to remain cautious, a market source said.

** Despite the fluctuations, interest for April cargoes remain supported during MOC, with growing interest for May cargoes as well.

** Prices fell at the end of the week after breaking past $1,200/mt mark for FOB Korea amid bearish crude sentiments.

Ethanol

**Gasoline prices had started to increase in the Philippines, which is expected to impact fuel ethanol consumption in the coming weeks, industry sources said.

**Offers in the Philippines stood at around $780/cu m CFR Philippines with buying interest muted.

**Elsewhere, US ethanol delivered to the Philippines fell to $754/cu m on March 11 against $761.67/cu m on March 4.

**The US Energy Information Administration data was bearish, with both ethanol output and inventories increasing. US ethanol production rose 31,000 b/d in the week ended March 4 to average 1.028 million b/d, reported EIA.