Asia light ends: Key market indicators for Aug 2-6

Asia's light end markets were softer in mid-morning trade Aug. 2, with gasoline dampened by weaker US RBOB-Brent crack spread and lingering worries over Asian auto fuel demand due to COVID-19 restrictions.

Asian naphtha is following crude lower, with the market shifting into the H2 September cycle, even as it faces activity brought over from the previous cycle.

LPG awaits fresh demand from China and India as Middle East supply is expected to remain healthy for September-loading cargoes.

New front-month ICE October Brent crude futures stood at $74.56/b at 0420 GMT Aug. 2, down 85 cents/b from the previous close.

Gasoline

**September FOB Singapore 92 RON gasoline swap fell at the start of the week, pegged notionally lower around $82.35/b early Aug. 2 trade, down 0.8% from the previous session as outright prices considered a lower US RBOB-Brent crack following the fresh month's roll from July to August.

**The US RBOB-Brent crack was seen at $22.52/b at 0230 GMT Aug. 2, down 0.91% from the previous session. Yet, sentiment on the US RBOB-Brent crack remained supportive, with participants noting that the West might continue to shake off concerns over potential fresh restrictions amid confidence over vaccinations.

**Fundamentals in Asia remained unstable as demand lags. Southeast Asia's top gasoline buyer Indonesia announced at the weekend that restrictions outside Java Island would be extended another week until Aug. 9, with total number of COVID-19 cases across the country remaining lofty.

**Other Asian countries also reported record COVID-19 infections, putting a grim demand outlook on gasoline. Malaysia reported a record of 17,786 new infections on July 31, John Hopkins University data showed, despite being in indefinite lockdown since June. Thailand also posted a record 18,912 COVID-19 infections on July 31.

Naphtha

**The physical C+F Japan naphtha marker fell $1.75/mt from the Asian close on July 30 to $699.50/mt in mid-morning Asia trade Aug. 2, on lower crude.

**Asian naphtha will move into trading for the H2 September-delivery cycle this week with the half-month roll, and could see a lag in buying activity. End-users had dragged their feet in moving to buy for the previous trading cycle due to crude price fluctuations and an overall market uptrend.

**High naphtha flat prices weighed on sentiment and the market faced limited supply from Western arbitrage cargoes. Benchmark C+F Japan naphtha cargo was last assessed at $701.25/mt at the July 30 Asian close, up $19.625/mt on the week, Platts data showed.

**The high price of naphtha as cracker feedstock weighed on olefin margins. However, the key CFR Northeast Asia ethylene spread to C+F Japan naphtha cargo held above the typical $250/mt breakeven for integrated producers, at $303.75/mt at the Asian close on July 30, down $19.625/mt week on week, Platts data showed.

LPG

**Front-month September propane contract price swap was notionally indicated at $665.50/mt Aug. 2, versus $671/mt valued on July 30, and $5.50/mt above the August term contract prices.

**The September propane CP swap was indicated $7/mt above butane Aug. 2, versus $6/mt the previous session.

**September-October propane structure was indicated at $1.25/mt contango Aug. 2, while October-November was at parity.

**Eyes will be on Middle East acceptances of term nominations for September, starting with Qatar Petroleum this week, on expectations producers would largely keep to nominated volumes.

**Chinese stocks are high after large imports in recent months. Traders are watching for signs of further imports, or if focus would be on drawing down stockpiles at a time of healthy demand from PDH plants.

**Demand for LPG as alternate petrochemical feedstock is not expected to resurface as September FEI propane swap indicated at a premium of $22.41/mt Aug. 2 versus $15.75/mt on July 30.