Asia light ends - Key market indicators this week

Singapore — The Asian light ends market rose Monday, underpinned by stronger crude prices and a gradual demand recovery, as lockdowns in some Asian countries ease and Chinese demand for light ends products rises.

A rebound in ethylene prices also bolstered naphtha, said sources.

ICE July Brent crude futures rose 74 cents/b from Friday's 0830 GMT close to stand at $30.65/b at 0300 GMT Monday.

GASOLINE

** June FOB Singapore 92 RON gasoline opened Monday morning at $31.70/b, higher from Friday, as prices track the recovery in crude prices.

** The FOB Singapore 92 RON gasoline crack against Brent swap crossed into positive territory for the first time since March 13, pegged between flat and plus 15 cents/b, according to broker indications, as participants look toward improving supply-demand fundamentals as lockdowns ease.

** The easing of lockdowns will underpin Asia gasoline this week, said sources. Lockdowns in Pakistan and the Philippines – both net importers of gasoline – are ending, while economic activity in Thailand is poised to resume with many businesses given the green light to reopen. Schools in South Korea are also slated to reopen this week, which will encourage more driving activity, added sources.

** Malaysia, however, will extend restrictions until June 9, although some businesses have begun to reopen.

LPG

** Front-month June CP propane swap was notionally indicated at $292/mt Monday, up $3/mt from Friday's close and $48/mt below the May contract price. CP propane June/July backwardation was notionally indicated at $6/mt, narrowing from $11/mt last Friday, on expectations of comfortable supply from the Middle East and the US.

** After Qatar's acceptances of June nominations last week saw no cuts and around two delays, eyes are on ADNOC's announcement due midweek, followed by Saudi Aramco's next week that is expected to see no cancellations, unlike those for May loadings.

** Saudi Aramco is said to have an evenly-split spot cargo on offer, adding to regional supply. India is also continuing to diversify supply sources.

** After holidays last week in Asia including China, Chinese buyers are set to return this week and absorb ample regional supply.

** Residential LPG supplier China Gas is expected to conclude one year-term contract discussions for supply starting in July, while PetroChina was heard to have awarded a purchase tender for H2 June delivery, though details were unknown.

NAPHTHA

** The CFR Japan naphtha physical benchmark opened Monday at $258/mt, up $10.50/mt from last Friday's Asian close, boosted by higher crude futures and gains in CIF Northwest Europe naphtha crack.

** Purchasing for H2 June delivery naphtha was expected to pick up this week, and Asian demand was expected to stay supported by a rebound in ethylene margins. The CFR NE Asia ethylene margin to CFR Japan naphtha was at $207.50/mt on Friday, up from an intraweek low at $134.50/mt.

** A narrower LPG/naphtha spread, coupled with the rebound in ethylene margins, has at least one steam cracker mulling an increase in use of LPG feedstock to produce more ethylene, said sources. The Far East Index propane swap spread against the Mean of Platts Japan naphtha swap fell $2/mt day on day at $49.50/mt at Friday's Asian close.

** The contango on the June/July Japan naphtha swap spread narrowed by 25 cents/mt from last Friday at minus $5.50/mt Monday morning.

** The East/West spread between the June CFR Japan naphtha and the CIF NWE naphtha held stable Monday morning, remaining at $20.50/mt since Friday's Asian close, as freight for the LR2 Mediterranean-Japan voyage plateaued at $7 million last week.