Asia light ends - key market indicators this week

Singapore — The Asian gasoline and naphtha markets fell slightly in mid-morning trade on June 15 as concerns of a second wave of coronavirus cases hit oil markets, sources said.

Asian steam cracker operators eyeing a feedstock switch from naphtha to LPG has stoked interest in propane and butane, underpinning the July CP swap despite a fall in ICE Brent crude futures.

August ICE Brent crude futures was at $37.82/b at 0300 GMT on June 15, falling from $38.19/b at the Asian close on June 12.

GASOLINE

** The front month July FOB Singapore 92 RON gasoline swap opened June 15 at around $39.65/b, 25 cents/b lower from the June 12 Asian close as global oil markets remained weighed down by fears over a second wave of coronavirus cases.

** The concerns will likely cap the gasoline upside this week, with the US RBOB/Brent crack expected to struggle to regain its bullish momentum as surging cases in the US cloud sentiment.

** Still, firmer regional demand will support Asian fundamentals, as Thailand officially lifts its nationwide night time curfew on June 15, while increased driving in Malaysia and Indonesia -- both major gasoline consumers -- pads onto the improved appetite for cargoes in Southeast Asia.

** Market participants will also focus on negotiations behind Malaysia Petron's term gasoline tender, which is set to provide an indication of high-octane demand for the rest of the year. The tender, which sought up to 900,000 barrels/month of 95 RON gasoline and up to 200,000 barrels/month of 97 RON gasoline, will close on June 15 with negotiations to extend into July.

NAPHTHA

** CFR Japan naphtha physical benchmark opened June 15 at $333.75/mt, down $2.75/mt from the Asian close on June 12, on lower crude prices.

** Front month June/July MOPJ naphtha swap spread rose 75 cents/mt day on day on June 12, but has since shed 25 cents in mid-morning trade on June 15, with broker indications at $2.25/mt.

** Tight supply seen for H2 July delivery cycle for light naphtha grades, with trade interest for H1 August delivery cargoes to begin from June 16.

** Lower LPG prices had petrochemical makers mulling a switch from naphtha feedstock to LPG for the August delivery cycle, sources said. The Argus Far East Index propane swap spread against the Mean of Platts Japan naphtha swap was at minus $14.25/mt on June 12, Platts data showed.

** Lower freight has begun to draw in more naphtha shipments from Europe, with 1.724 million mt due to load over June 1-24.

LPG

** Front month July CP propane swap was notionally indicated on June 15 at $322.50/mt, up from $318/mt on June 12. CP July/August propane swaps notionally flipped to a backwardation of $1/mt, compared with a $2/mt contango June 12.

** Eyes are on whether propane's discount to naphtha will steepen further, prompting more North Asian crackers to follow South Koreans in switching to LPG as alternate petrochemical feedstock.

** Saudi Aramco is due to announce acceptances of term nominations for July-loading cargoes later this week.

** Traders expect lifters to lower nominated volumes from normal levels, even after Aramco had canceled or deferred cargoes for May and June loadings in line with production cuts by OPEC+ members and Indian buyers not expected to restore demand until August.

** However, some traders do not expect Aramco to cancel or defer as many as 10 cargoes seen for June loading.

** With supply from other Middle East producers at healthy levels, pressure remains on the FOB market amid soft demand compared with Western cargoes.