Asia octane: Key market indicators for Nov 29-Dec 3

The Asian market for octane blendstocks will likely stay tepid in the week of Nov. 29–Dec. 3, amid worsening COVID-19 situation due to emergence of the Omicron variant.

Nonetheless, some support in the ethanol complex might buoy demand for the blendstock market.

ICE January Brent crude futures stood at $76.16/b at 0300 GMT Nov. 29, up $3.44/b, or 4.73%, from the Nov. 26 settlement.

Naphtha

** The Asian naphtha market is expected to see the tail-end of buying activity for first-half January as the trading cycle rolls to H2 January delivery on Dec. 1.

** Taking its cue from a downtrend in crude, the benchmark C+F Japan naphtha cargo fell $34.25/mt day on day to $720.25/mt at the Asian close Nov. 26, S&P Global Platts data showed. The benchmark price touched an eight-week low and was last assessed lower at $713.375/mt on Oct. 1.

** Gains in the naphtha market outpaced that of gasoline as the reforming spread -- the difference between Singapore 92 RON gasoline and Singapore naphtha derivative -- swung to a nine-month low. The spread narrowed by $1.43/b day on day to $5.32/b at the Asian close Nov. 26. The narrowed spread makes it economically unviable for gasoline producers to use naphtha as a blendstock, dampening blendstock demand. The reforming spread was last lower on Feb. 9 at $5.21/b, Platts data showed.

** The key PX CFR Taiwan/China marker and the C+F Japan naphtha cargo spread narrowed $10.25/mt on the week to $145.75/mt Nov. 26, Platts data showed. This was still below the typical breakeven of around $280-$300/mt, likely to keep run rates low, sources said.

MTBE

** The Asian MTBE FOB Singapore marker is expected to weaken over Nov. 29-Dec. 3 due to growing concerns on the new COVID-19 variant and potential resumption of mobility restrictions.

** Rising regional MTBE supplies are going to subdue the market sentiment. South Korea's MTBE monthly trade balance flipped to a surplus in October, shored up by new capacity additions. The trade surplus in October was recorded at around 5,216.9 mt, up from the deficit of around 76.7 mt in September, the latest customs data showed.

** New variants of COVID-19 are predicted to add uncertainties in the market amid muted trading due to the ongoing 2022 annual term contract negotiation.

Toluene

** Asian toluene could see added pressure amid slow demand and tepid spot discussions in the Nov. 29-Dec. 3 week as most buyers are well-placed through the year-end, sources said.

** Term contract negotiations continues to be delayed with the freight component being a major factor. Crude selloff over the weekend continues to pressure toluene prices further.

Isomer-MX

** Bearishness in Isomer-MX market may continue in the medium term, given that demand for both PX production and gasoline blending has not been upbeat, according to sources.

** While lower demand for MX cargoes is seen contributing to bearish sentiment, the market is also likely to track recent volatility in crude on the back of new Omicron variant of the coronavirus.

Ethanol

** US ethanol delivered to the Philippines jumped to $907.33/cu m on Nov. 26, against $883.67/cu m on Nov. 19.

** US ethanol on the prompt continued to climb. The Chicago Argo terminal ethanol price was assessed at a 15-year high Nov. 24, as tight logistics and prompt demand continues to push prices higher.

** US ethanol production added 19,000 b/d to average 1.079 million b/d for the week ended Nov. 19, Energy Information Administration data showed.

** In the Philippines, major oil companies have completed first-quarter purchases, though small parcels could be bought and sold by some players. However, the sharp rise in ethanol prices left smaller players with tough choices to obtain resupply.