Asia light ends - Key market indicators this week

Singapore — The Asian light ends market was steady to slightly softer in mid-morning trade July 27 on slight crude losses, but gasoline and naphtha sentiment could firm this week if hurricane Hanna impacts US refining operations, pushing up RBOB crack.

Saudi Aramco will announce its August Contract Prices for propane and butane in the week ending August 1, amid expectations of steady-to-higher levels from July.

September ICE Brent crude futures stood at $43.18/b at 0300 GMT July 27, down from $43.36/b at the Asian close July 24.

Gasoline

** The August Singapore 92 RON gasoline swap opened July 27 at around $45.40/b, largely steady from the previous session as rising geopolitical tensions between the US and China, coupled with fresh cases of coronavirus kept sentiment soft in international oil markets.

** That said, Asian gasoline will likely see strength this week from the West, as severe weather raises concerns of supply disruption. Hurricane Hanna, which made landfall along the Texas coast on the evening of July 25, could impact around 670,000 b/d of US refining capacity, according to S&P Global Platts calculations. The US RBOB/Brent crack as a result, at 0230 GMT rose 11% on the day to $10.75/b, the highest since June 24.

** Asian participants will keep an eye out for possible spot demand from Indonesian state-owned Pertamina. Import demand from the Southeast Asian oil giant is expected to remain thin at 5 to 6 million barrels in August, but a surprise nomination late last week to lift an additional 2 million barrels of gasoline for August raised hopes Pertamina will import more next month.

** Refinery turnarounds in India will tighten domestic supply-demand balances. State-owned refiner Indian Oil Corp. idled its 300,000 b/d Paradip refinery over the weekend, and will keep the complex offline for maintenance until August 15.

Naphtha

** The CFR Japan naphtha physical benchmark opened July 27 at $401.375/mt, up $3.75/mt from the Asian close on July 24, on slight losses in crude prices.

** Buying activity for H1 September delivery slated to pick up in the week ending August 1, as Japan's naphtha end users are expected to begin purchases upon return from national holiday over July 23-24.

** The front month August/September Mean of Platts Japan naphtha swap spread had widened over June 20-23, strengthening $1.75/mt intra-week to $4.25/mt on July 24. The backwardation structure firmed 25 cents/mt further in mid-morning trade July 27, with broker indications at $4.50/mt.

** With Asian steam crackers operating at 100% rates on good olefins margins, and naphtha splitters running at below 100% on weak aromatics margins, heavy full range naphtha for splitter feed is expected to trade $3-4/mt below steam cracker grade naphtha this week, sources said.

LPG

** Front month August CP swaps notionally indicated July 27 at $367/mt, versus $368/mt valued on July 24.

** Saudi Aramco is due to announce August term contract prices around July 28, some traders said, with August propane CP expected to be rolled over from July CP at $360/mt and butane at $340/mt. A North Asian trader expects propane CP to be around $370-$380/mt, while others predict $350-$360/mt to $400/mt range for propane and $10-20 mt below that for butane.

** Ample Middle East LPG supply competes with healthy US arrivals in September for softening Asian demand, widening CP propane swaps August/September contango notionally to $1.5/mt on July 27, from $1/mt June 24. This also widened FEI propane swaps contango, indicated July 27 at $10/mt versus $9/mt July 24.

** VLGC rates expected to rise further after hitting over $49/mt last week –- more than two-month high -- due to busy Middle East trades and US ships taking longer routes to Asia.