ASIA OCTANE: Key market indicators Oct 25-29

Asian naphtha demand is expected to be supported by positive olefins margins in the week of Oct. 25-29, while an uptick in Chinese demand, as well as easing COVID-19 restrictions in other parts of Asia, have supported the Asian MTBE, toluene and isomer-MX FOB Singapore markets. Demand for fuel ethanol in the Philippines looked to improve, too, also due to easing COVID-19 restrictions.

ICE Brent futures edged down 0.29% at $84.77/b at the Asia close Oct. 22.

Naphtha

** The Asian naphtha complex was expected to see the tail end of buying activity for first-half December delivery cycle this week, as it rolls to the second-half December delivery cycle the following week Nov. 1. However, the market is expected to see extended support from firm demand from Asian steam crackers on the back of positive olefins margins, sources said.

** Strength in the market was mirrored on the CFR Japan naphtha physical crack against front-month ICE Brent crude futures, which strengthened to a seven-year high of $149.85/mt at the Oct. 22 Asian close, S&P Global Platts data showed. The physical crack saw an uptrend, rising $4.875/mt day on day and $2.15/mt week on week at the Oct. 22 Asian close. Levels were last higher July 29, 2014, at $150.35/mt, Platts data showed.

** Demand for naphtha as a steam cracker feedstock was firm as the key CFR Northeast Asia ethylene and C+F Japan naphtha spread widened $7/mt day on day and $33.375/mt week on week to $414.375/mt at the Asian close Oct. 22. The widened margin is watched closely by steam cracker operators, and as levels remained above the typical breakeven level of $300-$350/mt for non-integrated producers, operating levels are likely to be kept at near full or full capacity, market sources said.

** A stronger gasoline market against naphtha was reflected in a widened reforming spread. The spread -- the difference between Singapore 92 RON gasoline and Singapore naphtha derivative -- widened slightly 18 cents/b day on day to $9.67/b at the Asian close Oct. 22, Platts data showed. The wider reforming spread is likely to fuel demand for naphtha as a gasoline blendstock, which has already been supported by positive olefins margins.

** Meanwhile, the aromatics sector was weighed on sufficient stocks and slow demand downstream as prices of PX CFR Taiwan dipped $12/mt day on day and $28.17/mt week on week at $939.50/mt at the Oct. 22 Asian close. The downtrend in PX prices narrowed the key PX CFR Taiwan/China marker and C+F Japan naphtha cargo spread by $15/mt day on day and $29.795/mt week on week at $153.875/mt on Oct. 22, Platts data showed. The spread remained under pressure as it was still under the typical breakeven of around $280-$300/mt, which would likely motivate splitters to keep run rates low, sources said.

MTBE

** Asian MTBE is expected to be on an upward trajectory amid continued rallies in the gasoline and crude oil markets. The FOB Singapore MTBE reached a more-than-three-year high at $881/mt on Oct. 22.

** Improving demand from China and Southeast Asia are likely to continue to add an upbeat sentiment, with several SEA markets lifting COVID-19 restrictions.

** Against the backdrop, the MTBE gasoline blending value was estimated at $205.1033/mt as of Oct. 22, Platts data showed.

Toluene

** The Asian toluene markets have been mixed with overall support for the Chinese and Southeast Asian delivered prices on the back of improved demand and active trades. Prices in all markets were stronger on the domestic front in China, as shipments were delayed and factories' operating rates remained reduced. Domestic prices have continued to rise for four straight days. The strength is likely to persist this week, particularly on the new series of action plans from China's NDRC in a bid to enhance energy efficiency.

** The FOB Korea marker was lower last week with active selling but no trades. The Indian market has also quietened significantly from last month's active buying ahead of the Diwali festival. The markets could swing both ways, with the increasing Chinese appetite and the return of more activity in Southeast Asia as more countries lift COVID-19 restrictions.

Isomer-MX

** China domestic MX prices are likely to remain firm in the near term with a recent drawdown in domestic inventory levels, as well as logistical bottlenecks slowing down the import flow. The domestic prices in China may also continue to support international prices.

** While the MX-naphtha spread has improved, the spread between paraxylene and MX has deteriorated in recent weeks. The PX-MX spread narrowed to a multimonth low of $80.50/mt on Oct. 22, the lowest since June 10 at $77.83/mt, showing that the downstream markets are not in tune with the firmer MX market of late.

Ethanol

** US ethanol delivered to the Philippines fell to $681.67/cu m on Oct. 22 from $683/cu m on Oct. 15 as the first half-monthly cycle assessment window rolled to H1 December from H2 November.

** US ethanol moved higher during the week with tightness on the prompt outweighing bearish production data. US ethanol production for the week ended Oct. 15 averaged 1.096 million b/d, Energy Information Administration data showed Oct. 20. Production rose 64,000 b/d on the week.

** Continuing from the previous week, demand for fuel ethanol was expected to improve in the Philippines due to shortened curfew hours and easing COVID-19 restrictions, though buyers were not keen to chase offers for imported ethanol, sources said. Offers for December were pegged at $710-$750/cu m CFR Philippines.