Asia light ends: Key market indicators July 19-23

Asia's light ends market was weaker in midmorning trade July 19, as the region expects Chinese refiners to raise gasoline exports, while Indonesian imports remain dampened by the coronavirus spread.

LPG was seeing ample supply from the Middle East to meet improving demand, while naphtha was largely following weaker crude, though supply was tight due lower European arbitrage flows in the face of healthy Asian demand.

Front-month ICE September Brent crude futures was at $72.64/b at 0331 GMT July 19, down 97 cents/b from the previous close.

Gasoline

** The August FOB Singapore 92 RON gasoline swap slipped in early July 19 trade, pegged notionally around $80.43/b, down 1.34% from the previous trading session hit by headwinds to the crude oil complex.

** Asia's gasoline market is expected to see some downside pressure, with industry participants watching out for China's next round of refined oil product export quota.

While the overall quota is expected to be lower than in 2020, it could open some leeway for Chinese refiners to export motor fuel cargoes from mid to end-August, raising near-term regional supply, industry sources said.

** Exacerbating demand concerns, Indonesia's state-owned Pertamina is expected to lower gasoline intake for August to 7 million-8 million barrels, from around 8 million barrels it had planned to import in July, sources said. The decline in gasoline imports come as the number of COVID-19 infections remain high.

** Focus will also be on the week's US Energy Information Administration report. US gasoline inventories posted an unexpected build in the week ended July 9, signaling a slight slowdown in US demand. Daily infected COVID-19 cases have started to increase again, adding pressure on gasoline demand.

Naphtha

** The physical C+F Japan naphtha marker fell $9/mt from the July 16 Asian close to $669.50/mt midmorning Asia trade July 19, on lower crude.

** Naphtha market faces tight supply and robust demand from petrochemical makers. The sentiment was supported by the 5.5-month high reached in front month August NWE crack of 90 cents/b at the July 16 European close, S&P Global Platts data showed.

** Fewer arbitrage cargoes were expected from Europe's July-loading program, as 1.57 million mt of naphtha was booked versus 1.78 million mt for June loading, Platts data showed.

** The firm sentiment was echoed in naphtha swaps during midmorning July 19, with brokers pegging front-month August-September Mean of Platts Japan naphtha swap spread at $10.50/mt, up 50 cents/mt from the July 16 close, Platts data showed.

** The key CFR Northeast Asia ethylene spread to benchmark C+F Japan naphtha cargo rose to $326/mt on July 16, up $28.50/mt week on week, Platts data showed.

This was above the typical breakeven spread of $250/mt for integrated producers, and within the $300-$350/mt breakeven spread for non-integrated producers, which would keep naphtha in demand as crackers continue to run at full, or near full levels, sources said.

LPG

** Front-month August propane contract price swap was notionally indicated at $650/mt July 19, versus $654/mt valued July 16, and $30/mt above July term CPs.

** July propane CP swap was indicated at $7/mt above butane July 12, unchanged from the previous session.

** August-September CP propane swap was indicated at a backwardation of $4.50/mt July 19 from $5/mt the previous session, while September-October was indicated unchanged at a $1/mt backwardation.

** August FEI propane swaps was notionally indicated at a premium of $10.80/mt to MOPJ naphtha July 19 from a $9.75/mt previous session.

** Middle East supply was healthy as Saudi Aramco announced acceptances of August-lifting term cargo nominations without cuts or delays. This came after ADNOC and Qatar Petroleum had announced no cuts or delays as well, while QP had also sold a 45,000 propane cargo for Aug. 12-13 loading.

** The pick up in Middle East and US loading activity has given further bounce in VLGC rates on the Ras Tanura-Chiba route toward $40/mt.