Asia light ends - key market indicators this week

Singapore — Asian light ends markets were lower in mid-morning trade June 22 than at the end of last week, tracking weakness in the crude complex on concerns a second wave of COVID-19 cases will cloud demand recovery.

ICE Brent August crude futures were down 47 cents/b from the Asian close on June 19 to stand at $42.32/b at 0300 GMT on June 22.

GASOLINE

** July FOB Singapore 92 RON gasoline opened June 22 at around $46.35/b, marginally lower than the previous trading session, as news of a potential second wave of coronavirus lockdowns weighed on sentiment.

** Fresh lockdowns in China could again spur exports of gasoline by Chinese refiners, which have raised run rates significantly since March, leading to heavy domestic supply.

** The number of coronavirus cases in Indonesia, the region's largest buyer of gasoline, has also surged, exacerbating concerns of further delays to regional demand recovery.

** That said, pockets of demand in Vietnam, the Philippines and Japan are expected to sustain gasoline's upward momentum in the near term, with Singapore expected to see demand sharply recover this week after emerging from partial lockdown on June 19.

NAPHTHA

** The CFR Japan naphtha physical benchmark opened June 22 at $382.25/mt, down $5.50/mt from the Asian close on June 19, on lower crude prices.

** The front month July/August MOPJ naphtha swap spread rose $2.75/mt day on day June 19 and the backwardation strengthened further in mid-morning trade on June 22, with broker indications at $6.75/mt.

** Firm trading sentiment persisted into the current trading cycle for H2 August delivery cargoes as North Asian naphtha buyers grappled with tight supply amid lower regional refinery production and lower Western arbitrage volumes.

** The cash differential for spot paraffinic naphtha to the benchmark Mean of Platts Japan naphtha physical was assessed up $2/mt on the day at plus $11.50/mt at the Asian close June 19 on a CFR Japan basis. It was last wider March 3 at $13.50/mt, Platts data showed.

** Petrochemical makers were closely watching the widening discount of LPG to naphtha with a view to begin using more LPG in August, sources said.

LPG

** Front month July CP swaps were notionally indicated June 22 at $343/mt, compared with $349/mt at the Asian close June 19.

** Saudi Aramco announced its July LPG term cargo acceptances without cuts or delays, as term lifters nominated lower-than-usual volumes for July on sluggish demand in India and China amid high stocks.

** The CP propane swap July/August backwardation was notionally at $4/mt on June 22, matching the structure on June 19. The spread narrowed $1.50/mt on the day to $4/mt at the close on June 19 following Aramco's acceptance of July nominations, as the Middle East market remains well-supplied.

** India expected to resume spot imports only in September as the country had raised imports and likely over-bought during the lockdown, with May imports at an eight-month high of 1.51 million mt, based on PPAC data.

** Japanese steam cracker operators may start purchasing LPG as feedstock this week after the FEI propane discount to MOPJ naphtha widened to minus $33.75/mt on July 19. With butane $14/mt below propane, it has become economically viable as cracking feedstock.