Asia light ends: Key market indicators this week

Singapore — The Asian light ends market started the week of March 15 on firmer footing than the week before, underpinned by stronger crude prices.

Asia gasoline continued to ride on the coat-tails of a stronger US RBOB-Brent crack ahead of peak summer driving season and cargo outflows to West Africa and Middle East.

Some North Asian steam crackers have started switching to LPG as alternative feedstock as its discount to naphtha widens, boosting LPG prices, but naphtha remained supported on attractive olefins margins and strong demand from the gasoline sector.

May ICE Brent crude futures rose 32 cents/b from the March 12 Asian close to stand at $69.87/b at 11 am Singapore time (0300 GMT) March 15.

Gasoline

** The April FOB Singapore 92 RON gasoline swap opened the week on a stronger note, rising 1% from the March 12 Asian close to stand at $76.17/b at 0300 GMT March 15, on stronger crude prices and US RBOB-Brent crack.

** Asia gasoline is expected to stay firm through this week, with optimism on the near-term outlook continuing to grow as peak summer driving season approaches. The approach of summer will see the upward momentum in the US RBOB-Brent crack gather pace, especially as US gasoline supplies continue to face sharp drawdowns amid lower refinery run rates and the gradual easing of domestic movement restrictions.

** In Asia, eyes are on Indonesia's gasoline imports for April. The Muslim holy month of Ramadan will be celebrated over April 12-May 12 and traditionally sees the top Asian gasoline importer step up gasoline import volumes. However, industry participants say any rise in the country's gasoline import volumes will likely be gradual, as COVID-19 concerns continue to weigh on policymakers who may attempt to curtail the yearly exodus of travelers from cities.

** Nevertheless, driving activity in Indonesia has continued to climb since movement restrictions were eased in mid-February. Driving activity rose to its highest to date in 2021 at around 30% above baseline levels in early March, according to mobility data from Apple.

** Also supportive for Asian gasoline, more cargoes are expected to flow out of the region, a move that will continue to improve Asian supply-demand balances. Since early March, at least six long range tankers have been placed on subjects for Asia-West Africa voyages, while at least four long range tankers have been heard placed on subjects for Asia-Middle East voyages. With the gasoline east-west spread being seen around minus $3.90/b early March 15, the arbitrage routes out of Asia remain open, traders said.

Naphtha

** The physical CFR Japan naphtha benchmark stood at $629.50/mt in early trade March 15, up $7.50/mt from March 12 Asian close, due to higher crude.

** Sentiment was firmer with front month April-May Mean of Platts Japan naphtha swap spread at $8/mt in mid-morning trade March 15, according to broker indications. This was 50 cents/mt higher than March 12 Asian close, when it was at $7.50/mt, Platts data showed.

** Asian naphtha demand continued to be supported by positive olefin margins, however steam crackers have begun to buy LPG as an alternative feedstock due to the decrease in LPG prices and the wide margins for olefin production, sources said.

** The key spread between CFR Northeast Asia ethylene and CFR Japan naphtha physical reach a more than two-year high at $596.25/mt March 10 before edging down to $578/mt March 12 due to firm naphtha prices, but remained well above the $350/mt breakeven spread for non-integrated producers, Platts data showed.

LPG

** The front-month April CP propane swap notionally indicated March 15 at $585.4/mt, versus $584/mt valued March 12.

** The April-May CP swap backwardation was indicated at $33/mt March 15, unchanged from the previous session.

** The premium of propane to butane was indicated March 15 at $27/mt, narrowing slightly from the previous session. But butane remained softer amid a pause in spot demand from Indonesia and India, where February consumption fell to the lowest since last September.

** Propane demand was supported by Chinese propane dehydrogenations plants, though this could be limited by ongoing or scheduled maintenance in March, while cheaper LPG versus naphtha was spurring some demand from North Asian crackers.

** Term supply was stable from Qatar and ADNOC, though Saudi Aramco April-loading acceptances could be limited. Spot and mini-term exports of mixed cargoes were seen from Qatar and Kuwait, while US propane exports to Asia were returning to normal.

** Middle East-Japan VLGC rates were expected to continue recovering towards the mid-$30s/mt on steady US loadings and Middle East shipping activity.