Asia octane: Key market indicators Oct 11-15

The Asian market for octane blendstocks entered the trading week starting Oct. 11 on a firm note, with naphtha demand expected to hold amid healthy ethylene-naphtha margins and the MTBE and ethanol markets supported by bullish crude and gasoline prices.

Higher demand in China for toluene during the holiday season was expected to support regional toluene prices, while isomer-MX prices were also expected to rise if upstream markets remain firm.

Naphtha

** The Asian naphtha complex is likely to remain firm in the trading week starting Oct. 11 as high LPG prices continue to support demand for naphtha as a petrochemical feedstock, further boosting the already firm fundamentals that stem from healthy olefin margins.

** Reflecting firm sentiment, the CFR Japan naphtha physical crack against front month ICE Brent crude futures reached a more than five-year high at $141.275/mt at the Oct. 8 Asian close, up $10.075/mt day on day and up $16.275/mt month on month. The crack was last higher Jan. 6, 2016 at $141.475/mt, S&P Global Platts data showed.

** The CFR Northeast Asia ethylene to C+F Japan naphtha spread narrowed $23.125/mt day on day to $384.875/mt at the Asian close Oct. 8, but remained above the typical breakeven level of $300-$350/mt for non-integrated producers, which was likely to keep steam crackers operating at full or near full capacity.

** Strength in the Asian naphtha complex outpacing that of gasoline was reflected in the reforming spread between Singapore 92 RON gasoline and Singapore naphtha derivative narrowing $1.01/b week on week to $8.11/b Oct. 8, Platts data showed. This was likely to dampen demand for naphtha as a gasoline blendstock.

** A boost in downstream demand has led to a spike in the aromatics sector, with paraxylene at a two-month high at $931.33/mt CFR Taiwan at the Asian close Oct. 8, the highest since touching $934.67/mt Aug. 13

** The key CFR Taiwan/China PX marker to C+F Japan naphtha cargo spread widened 0.875 cents/mt day on day to $166.205/mt Oct. 8, Platts data showed, and remained below the typical breakeven level of $280-$300/mt, which may prompt splitters to keep run rates low.

MTBE

** Asian MTBE prices are expected to be on an upward trajectory this week on the back of the bullish gasoline and crude oil prices.

** Nevertheless, MTBE supplies were on the rise from Taiwan, Indonesia and the Middle East, with no strong demand recovery observed in the market.

** High gas prices continued to add feedstock cost pressure to China's MTBE producers, many of which use propane or butane to make isobutylene as a precursor to the MTBE production process.

Toluene

** China's holiday season continues to support the toluene market, while upstream prices remain firm, adding further upward pressure.

** The benzene-toluene spread has been weakening since September to be assessed at $144.33/mt at the Asian close Oct 8, down $195.67/mt from the year-to-date peak of $340/mt on April 20. This could dampen toluene demand in the long run if the spread becomes uneconomical.

Isomer-MX

** Isomer-MX is likely to see prices rising this week if upstream markets remain firm, which could pull up the rest of the polyester chain.

** A 5.9-magnitude earthquake in Japan Oct. 7 was not seen to have impacted the MX market.

** Seasonal gasoline specification changes in several countries for winter in the Northern Hemisphere are expected to result in additional volumes of MX flowing into the spot market.

Ethanol

** The price of US ethanol delivered to the Philippines jumped to $673/cu m Oct. 8 from $612/cu m a week earlier.

** US ethanol production rose 64,000 b/d on the week to 978,000 b/d Oct. 1, while US ethanol stocks fell 289,000 barrels to 19.93 million barrels, US Energy Information Administration data showed Oct. 6. Tight supply, logistics issues, falling production and rising crude oil prices continued to boast ethanol prices.

** Offers for imported ethanol in the Philippines have risen to $690/cu m CFR Philippines, with little buying appetite seen among oil companies, while gasoline demand was reported to have been higher in September than in August as pandemic movement restrictions eased in Manila

Source: S&P Global Platts