Asia light ends - Key market indicators this week

Singapore — The Asian light ends market fell in mid-morning trade Oct. 26, tracking weakened crude oil prices.

Supply of Asian gasoline is expected to rise on higher refinery runs, while Middle Eastern LPG supply remains ample. A heavy inflow of Western naphtha shipments into Asia is weighing on the November naphtha market.

December ICE Brent crude futures fell to $41.13/b at 0300 GMT Oct. 26, down from $42.43/b at 0830 GMT Oct. 23, after Libya's National Oil Corp. said that output from the country may rise to 1 million b/d within four weeks, from the current 500,000 b/d.

GASOLINE

**The November FOB Singapore 92 RON gasoline swap opened Oct. 26 at around $43.50/b, falling by 2% from the previous trading session, tracking a fall in international crude oil prices and bearish gasoline sentiment.

**The US RBOB-Brent crack edged up marginally to stand at $5.89/b at 0230 GMT Oct. 26, from the $5.75/b at the Asian close on Oct. 23, as gasoline lagged the fall in crude, but outlook for the motor fuel was bleak as Europe implemented more lockdown measures to contain the spike in COVID-19 cases.

**In the UK, a two-week "firebreak" lockdown came into force in Wales on Oct. 23, under which everyone except critical workers are expected to stay at home. Regions in Italy, France, Spain, Germany and elsewhere have introduced curfews and travel restrictions in a bid to control the virus spread.

**In Asia, supply is expected to increase as refineries in India, Australia, Thailand, Taiwan and Japan gradually raise runs. China's gasoline exports in November are expected to be heavier than that of October. Traders are also keeping a close watch on China's expected announcement of third round of export quotas, which would set the tone for the market in the short term.

NAPHTHA

**The physical CFR Japan naphtha benchmark opened Oct. 26 at $377.25/mt, down $8.25/mt from the Oct. 23 Asian close, on lower crude oil prices.

**Soft sentiment was reflected in the derivatives market, which has seen a contango structure since Oct. 19. The front month November-December Mean of Platts Japan naphtha swap timespread widened 50 cents to minus $1.25/mt on Oct. 23 Asian close, Platts data showed. In mid-morning trade Oct. 26, the structure narrowed and brokers pegged the spread at minus $1/mt.

**Trading for the H1 December delivery cycle was slated to continue during the week, and purchasing activity by end-users at the tail end of the week ended Oct. 24 boosted the cash differential for spot paraffinic naphtha parcels up $2.50/mt to minus $2.50/mt at the Asian close Oct. 23, against benchmark Mean of Platts Japan naphtha physical assessments, CFR, Platts data showed.

**Market participants said the recent lack of strength in the Asian naphtha market was due to an excess supply of November-arrival Western arbitrage shipments, as well as the delayed restart of Lotte Chemical's Daesan naphtha-fed steam cracker.

LPG

**Front month November CP swaps was notionally indicated Oct. 26 at $430/mt, versus $432.5/mt valued Oct. 23, ahead of Saudi Aramco's announcement of term November CPs by end-week. Butane CP swap indicated $11/mt above propane.

**October/November CP propane swap contango was indicated at $6/mt versus $5.5/mt in the previous session and December/January at $6/mt versus $5.5/mt the previous session.

**Traders expect Aramco to set November propane CP at, or above, $430/mt, and butane $10/mt over that. "But maybe it will be changed in line with crude price and CP swap value when we recommend it on second round," a trader said.

**November CPs come amid ample supply from the Middle East, where major producers have accepted November term nominations without cuts and some advanced loadings, to meet firm North Asian demand.

**Chinese demand was driven by propane dehydrogenation plants operating at healthy levels to capture profitable propylene margins, while harsh winter forecast for Japan till February stoked heating fuel demand.

**End-year Indian and Indonesian demand was subdued.