Asia light ends: Key market indicators July 12-16

Asia's light ends market was mixed in midmorning trade July 12, with gasoline supported by China's short supply in the month and a firm US RBOB-Brent crack, though lingering concerns about COVID-19 travel restrictions would likely keep Southeast Asian demand in check in the week.

Healthy demand on positive olefins margins and limited Western inflows to Asia is expected to support naphtha prices, while LPG is easing after the recent rallies.

The front-month ICE September Brent crude futures was at $75.49/b at 0346 GMT July 12, down 10 cents/b from the previous close.

Gasoline

** August FOB Singapore 92 RON gasoline swap edged up in early July 12 trading, pegged notionally around $83.31/b, 1.07% above the previous trading session.

** Asia's gasoline market is expected to stay firm as tight near-term supply from China for July and a firm US RBOB-Brent crack keeps the sentiment bullish.

** On the US RBOB-Brent crack, the US Energy Information Administration's report for the week ended July 9 will come into focus, especially after data for the week ended July 2 showed record-high US gasoline demand.

** A few headwinds remain. Indonesia, Malaysia, Vietnam and Thailand have reported either new or near-record number of new coronavirus daily infections in the past week, prompting concerns that the recent slate of lockdowns and movement curbs could be extended into August, putting pressure on demand, sources said.

** South Korea late in the week ended July 10 reimposed movement restrictions in the capital Seoul, and industry sources will likely watch for signs of increasing South Korean supply for August, as domestic refiners could seek to export more cargoes to offset weakening domestic demand.

Naphtha

** The physical C+F Japan naphtha marker rose $9.75/mt from the July 9 Asian close at $691.75/mt midmorning Asia trading July 12, driven by the strength in European naphtha.

** The firm sentiment was reflected in naphtha swaps, with brokers pegging front-month August-September Mean of Platts Japan naphtha swap spread at $9.25/mt in midmorning trade, up 50 cents/mt from the July 9 close, S&P Global Platts data showed.

** The strong fundamentals were expected to support Asian naphtha in the coming week on firm demand from positive olefins margins and little opportunity to use LPG as an alternative feedstock while Western arbitrage flows are limited.

** The key CFR Northeast Asia ethylene spread to benchmark C+F Japan naphtha cargo rose to $298/mt July 9, up $4/mt on the week, S&P Global Platts data showed, above the typical breakeven spread of $250/mt for integrated producers, which would keep naphtha in demand as steam crackers run at full or near-full levels, sources said.

** Fewer East-bound arbitrage naphtha is expected from Europe, where demand from steam crackers has been strong, narrowing the East-West spread to $13/mt at the European close July 9, down $1.25/mt on the week, Platts data showed. The downtrend continued in midmorning July 12, as brokers pegged the August East-West spread at$12.75/mt.

LPG

** The front-month August propane contract price swap was notionally indicated at $655/mt July 12 compared with $657/mt valued July 9, and $35/mt above July term CPs.

** The July propane CP swap was indicated at $9/mt above butane July 12, versus $10/mt in the previous session.

** The August-September CP propane swap was indicated at a $4.50/mt backwardation July 12 from $6.50/mt in the previous session, while September-October was indicated at parity, steady to the previous session.

** August FEI propane swaps was notionally indicated at a discount of $2.38/mt to MOPJ naphtha July 12 from a $6.50/mt premium July 9.

** Abu Dhabi National Oil Co announced acceptances of August-lifting term nominations without cuts or delays, traders said, even as OPEC+ remained deadlocked over production levels beyond August.

** Saudi Aramco's acceptances are due July 19-20.

** Qatar Petroleum's export tender for 45,000 mt of propane to be loaded Aug. 12-13 is due to be awarded July 15.