Asia light ends - Key market indicators this week

Singapore — The Asian light ends market fell Monday, tracking weaker crude futures as fears over another bout of renewed trade tensions between the US and China weighed on crude prices.

Front month July ICE Brent crude futures fell to $25.89/b at 0300 GMT Monday, from $26.05/b at the Asian 0830 GMT close last Thursday. Singapore was closed Friday for the Labor Day holiday.

LPG

** Front month June CP propane swap was notionally indicated at $260/mt Monday, down $18/mt from last Thursday's close, lower than the Saudi May term CP set at $340/mt. This puts the CP back on a downtrend seen in the preceding three months before the May rebound.

** Market will watch India's decision on imports after the government extended the lockdown for two weeks beyond May 4, but with some easing of restrictions.

** There were concerns that India might try to turn back some cargoes bought earlier, indicating possible over-buying or difficulties in distribution, which could limit future imports, market sources said.

** Acceptances of Middle East term nominations for June lifting starts with Qatar this week, followed by ADNOC and then Saudi Aramco over the next two weeks. Market expects fewer Saudi cancellations compared with May, though focus will be on when crude cuts will start.

** Indonesian imports are deemed sufficient, or over-bought, signaling a pause in future imports, market sources said.

** Amid uncertain demand, except from China, the June/July CP backwardation was notionally pegged at $5/mt Monday, narrowing from $8/mt last Thursday.

GASOLINE

** June FOB Singapore 92 RON gasoline opened Monday at around $24.31/b, down from the $25.28/b assessment at Thursday's close, tracking weaker crude values.

** Market participants are, however, eyeing some demand recovery this week, with several countries easing domestic travel restrictions.

** Malaysia announced it will resume most economic activity from this week onwards, while India will ease restrictions in several identified "green zones". The country's major cities such as New Delhi and Mumbai remain under lockdown, according to media reports.

** Demand from Asia's top buyer, Indonesia, however, is poised to remain in the doldrums, as state-owned Pertamina was reportedly in talks with suppliers to defer May cargoes, suggesting that the oil and gas giant has ample supplies for the near term.

NAPHTHA

** The CFR Japan naphtha physical benchmark opened Monday at $200.75/mt, down $12.25/mt from last Thursday's Asian close, on the back of lower crude futures and CIF Northwest Europe naphtha crack.

** The contango on the June/July Japan naphtha swap spread deepened by $1/mt from last Thursday to minus $7/mt Monday morning.

** The East/West spread between the June CFR Japan naphtha and CIF NWE naphtha softened Monday morning to $27.50/mt, down $7/mt from Thursday's Asian close, as freight for the LR2 Mediterranean-Japan voyage had dropped from the record high of $9 million last Monday to $7.5 million last Friday.

** Asian demand was steady as steam cracker operators were keen to capitalize on cheap feedstock prices and favorable margins for propylene and polymers. The April average for physical CFR Japan price was $194.22/mt, down from the March average of $290.26/b.

** Naphtha is also in demand from Chinese naphtha-fed steam crackers as they stepped up operating levels to catch up on lost production brought about by the coronavirus-imposed lockdown.