Asia light ends - Key Market Indicators this week

Singapore — Asian gasoline and naphtha prices opened lower Aug. 3, as the worldwide spread of COVID-19 curbed global gasoline demand and impacted naphtha demand as a gasoline blendstock.

An anticipated resumption of demand from India, Indonesia, China and Japan is likely to support LPG this week.

October ICE Brent crude futures stood at $43.27/b at 0300 GMT Aug. 3, down from $43.71/b at 0830 GMT on July 30. Singapore was closed for a public holiday on July 31.

GASOLINE

** The September FOB Singapore 92 RON gasoline swap opened Aug. 3 at around $42.65/b, down by around 3% from the previous session as another heavy rise in coronavirus cases globally injected downward pressure on international crude prices.

** The resurgence in coronavirus cases in Asia is expected to take its toll on regional gasoline fundamentals this week, with countries re-imposing lockdown measures to contain pockets of new outbreak. Filipino president Rodrigo Duterte announced on Aug. 2 that strict lockdown measures would be re-imposed in the capital city of Manila, while Vietnam, which was among the first countries in Asia to open business activities in May -- moves quickly to curb a fresh outbreak in Danang.

** In Northeast Asia, governments in Taiwan, Japan, South Korea and Hong Kong started to report new cases of coronavirus, which have further exacerbated the demand outlook for Asian gasoline.

** Against this backdrop, focus this week will also be on the results of Pertamina's spot buy tenders for 88 RON and 92 RON gasoline. Results of both tenders, expected to be released Aug. 4, will set the tone for August. Gasoline demand from Indonesia remains uncertain amid the ongoing coronavirus pandemic. As of early Aug. 3, Indonesia's total infections surpassed 110,000.

NAPHTHA

** The CFR Japan naphtha physical benchmark opened Aug. 3 at $368.50/mt, down $18.63/mt, from the Asian close on July 30, on weaker crude and Northwest Europe naphtha prices.

** A sharp fall in Northwest Europe naphtha crack spreads on July 31 due to weaker gasoline prompted a corresponding fall in Asia, with the H1 October naphtha crack against October Brent crude futures opening at $44.48/mt on Aug. 3, from $58.68/mt at the July 30 Asian close.

** Reflecting the softer sentiment, the August/September Japan naphtha swap spread narrowed sharply over last week, by $4/mt from July 27 to close at plus 25 cents/mt on July 30, Platts data showed. The structure flipped into contango in mid-morning trade Aug. 3, with broker indications at minus 75 cents/mt for August/September and minus $1/mt for September/October.

** Buying activity for H2 September was slated to begin with the month's roll, however, end-users may not be in any hurry to begin purchases as prices had recently weakened on global economic contraction.

** Positive olefins margins has led to strong demand for high paraffinic naphtha grades by Asian steam crackers, but demand for heavy naphtha grades slipped amid low splitter run rates and more competitive prices for condensates, market sources said.

LPG

** Front month September CP swaps were notionally indicated Aug. 3 at $350/mt, versus $352/mt assessed on July 30.

** Middle East acceptances of term cargo nominations for September loading will start with Qatar Petroleum early this week followed by ADNOC at the end of the week and Saudi Aramco the week after next.

** As OPEC and its allies begin to officially ease off record production cuts on Aug. 1, traders expect major Middle East producers to accept the nominations without cuts or delays, supplying Asia with healthy volumes as buying appetite is set to recover.

** Indian Oil Corp. resumed buying an evenly split cargo for H2 September last week and is expected to continue buying, after a pause over June to August.

** Market is also expected to get support from China and Indonesia for September.

** Market sources hope imports from Japan, which plunged in June amid weak demand, will start to recover from August ahead of winter, even as September/October CP propane swaps market was notionally indicated Aug. 3 at a contango of $1/mt from $1.50/mt the previous session.