Asia light ends - Key market indicators this week

Singapore — Asian light ends were stable to slightly firmer during mid-morning trade on Aug. 24, with gasoline and naphtha poised to firm should storms heading into the US Gulf Coast take down some US refining capacity, market sources said.

LPG traders are awaiting the September LPG Contract Prices, expected to be announced by Saudi Aramco by the weekend. October ICE Brent crude futures fell 40 cents/b from the Asian close on Aug. 21 to stand at $44.35/b at 0300 GMT Aug. 24 .

GASOLINE

** The September FOB Singapore 92 RON gasoline swap opened Aug. 24 at around $47.95/b, steady to slightly firmer from the $48.06/b assessed on Aug. 2, despite losses in the international crude markets amid headlines on fresh waves of coronavirus outbreaks.

** Sentiment on Asian gasoline later in the week will hinge on developments in the US, with two storms set to curtail US refining activity along the Gulf Coast. The storms -- Hurricane Marco and Tropical Storm Laura -- are expected to hit the Louisiana coast and the Texas/Louisiana border on Aug. 24 and Aug. 27, respectively, according to the National Hurricane Center.

** With over 50% of US refining capacity on the coast, and 9.6 million b/d of production located in Texas, Louisiana and Mississippi, the shut-in of US refineries, if it happens, will inject strength into the Asian gasoline complex should the US RBOB/Brent crack spread widen. The US RBOB/Brent crack at 0230 GMT Aug. 24 was at $10.30/b -- a seven-week high.

** Meanwhile in Asia, supply side pressures will continue to weigh on regional fundamentals. In addition to heavy Chinese exports -- which market sources note will remain heavy into September -- a growing availability of cargoes from the Middle East and India is expected to add more bearish pressures onto a fragile regional supply-demand dynamic.

NAPHTHA

** The physical CFR Japan naphtha benchmark opened Aug. 24 at $405/mt, up $1.875/mt from the Asian close on Aug. 21, drawing strength from the European naphtha complex.

** Sentiment was firming, as front month September/October Japan naphtha swap flipped from a contango of minus 25 cents/mt on Aug. 20 to a backwardation of plus 50 cents/mt on Aug. 21, Platts data showed. The structure widened mid-morning Aug. 24 to $1.50/mt, brokers said.

** Spot trades also reflected higher differentials, with CFR Japan spot paraffinic naphtha parcels assessed at minus $1.50/mt at the Asian close on Aug. 21, up $1.25/mt on the day, Platts data showed.

** Sentiment for the H1 October delivery cycle was boosted by strength in the gasoline segment, and the expected return of naphtha demand from Taiwan's Formosa as its No. 3 steam cracker turnaround would be completed end-September.

LPG

** Front month September CP swaps was notionally indicated Aug. 24 at $368/mt, versus $366/mt valued Aug. 14.

** Saudi Aramco's September term Contract Prices are expected by the weekend or Aug. 31, with traders expecting at least a rollover of the August CP at $365/mt for propane, or as high as $380/mt. Butane is hovering $12/mt below propane.

** Forecasts of higher September term CPs are prompted by steady improvement in demand from China and the petrochemical sector due to healthy olefins margins, even as the discount of FEI propane swaps to the Mean of Platts Japan naphtha assessment gradually sharpened towards $30/mt.

** Even as Middle East supply in Asia remains ample with September acceptances of term nominations coming without cuts or delays, the market is looking to demand from India ahead of Diwali festivities in November.

** This is reflected in the narrowing discount of FOB Middle East cargoes to low-$20s/mt to CP swaps from almost $30/mt over a week ago, while the September/October and October/November propane swaps are both notionally indicated Aug. 24 at $2.50/mt contango, brokers said.