Asia octane: Key market indicators for Sep 27-Oct 1

Asia's naphtha, toluene and ethanol complexes are expected to lead octane blendstocks in the week started Sept. 27.

Asian naphtha demand is expected to remain firm as steam cracker operators continue to see healthy ethylene-naphtha margins. For toluene, demand is set to pick up in the near term in South Asia as the Indian holiday season approaches. For ethanol, spot demand emerged in Southeast Asia as COVID-19 movement curbs and restrictions are eased.

Meanwhile, MTBE and isomer-MX could remain on the back foot as Southeast Asian demand continues to suffer.

Naphtha

** The Asian naphtha market activity has picked up in the week as steam crackers emerged to buy first-half November delivery cargoes following holidays the previous week. The sentiment was likely to remain firm amid positive olefin margins, even as prices had swung to a near three-year high for the benchmark C+F Japan naphtha cargo -- at $711.125/mt on the Sept. 24 Asian close, a rise of $14.25/mt week on week, S&P Global Platts data showed. The price was last higher on Oct. 10, 2018, at $716.375/mt.

** A strengthening gasoline market against naphtha was reflected in a widened reforming spread between Singapore 92 RON gasoline and Singapore naphtha derivative, which rose 55 cents/b week on week to $6.70/b on Sept. 24, Platts data showed. This comes even as prices of the FOB Singapore naphtha cargo assessment -- a netback from benchmark C+F Japan naphtha and a key value for gasoline blenders -- rose 2.2% week on week. The widened reforming spread might make it more economically viable for gasoline producers to use naphtha as a blendstock, potentially boosting blendstock demand.

** That said, weak downstream demand led to a crunch in the aromatics sector, possibly having a bearish impact on the naphtha complex in the near term. The key PX CFR Taiwan/China marker against C+F Japan naphtha cargo fell as it saw a week-on-week decrease of $10.75/mt to $205.125/mt on Sept. 24, Platts data showed. The decreased earnings may prompt splitters to keep run rates low, and a source said splitter run rates were likely at 70%-80% capacity.

MTBE

** Asian MTBE prices are expected to be volatile as demand from major buying centers like China and Malaysia are expected to remain tepid on weak local gasoline blending demand.

** Taiwan's Formosa Petrochemical Corp. sold a second-half October-loading 10,000 mt MTBE cargo at a high single-digit discount to the Mean of Platts FOB Singapore MTBE assessments. The differentials were lower than the September-loading cargoes.

Toluene

** The toluene market looked somewhat balanced with more supplies arriving in India and marginally easing demand, sources said. The CFR India toluene cash differential was assessed stable from the previous session at $74/mt. There should still be more interest from India prior to the Diwali holidays, and should continue to lend support to demand in the Southeast Asian region.

** Further recovery in the Southeast Asian economies could see slightly improved operations and more cargoes exchanging hands, sources said. Several Singapore-origin and Thai-origin cargoes were dealt with a better premium above the FOB Korean marker, and should see continued strength for November cargoes, sources said. Besides Vietnam, the rest of the Southeast Asian countries were believed to be coming back onstream with toluene production and trades, traders said.

** China's domestic market continued to remain thinly traded as factories and operations are reduced to meet the state's "double control" regulation, traders said. Ex-tank supplies were not as high as the previous weeks but weak demand has not helped the prices, local brokers said.

Isomer-MX

** The isomer-MX market is expected to remain bearish as the benchmark fell to a more than an eight-month low against naphtha.

** Major turnarounds in October, alongside difficulty in doing shipments to China amid port congestions, has led to an oversupply of FOB Korea cargoes.

** Taiwan's CPC may have to keep one of its reformers with an MX capacity of 193,000 mt/year shut for up to two-three months after it suffered a fire Sept. 17, Platts previously reported.

Ethanol

** Trading in the US ethanol market was rangebound during the week. US ethanol production averaged 926,000 b/d in the week ended Sept. 17, falling 11,000 b/d on the week but rising 20,000 b/d higher year on year, Energy Information Administration data showed Sept. 22.

** US ethanol delivered to the Philippines rose to $642/cu m on Sept. 24 from $637.33/cu m on Sept. 17.

** Demand for fuel ethanol was improving in the Philippines, according to a source, who added that gasoline consumption has been up since Sept. 16 with traffic being allowed on roads till 10 pm local time compared with the earlier 8 pm, along with relaxed dining restrictions. An offer was reported at $640/cu m CFR Philippines.