Asia light ends - Key market indicators this week

Singapore — The Asian light ends markets opened the week on a slightly weaker note, amid lower crude prices, sources said.

Asian gasoline sentiment is expected to be balanced ahead of China's announcement of the first round of its 2021 oil product export quota, while naphtha was underpinned by strong demand from Asian steam crackers.

Some LPG traders expect Saudi Aramco to set the January propane and butane Contract Prices at below December CPs, while others expect them to be higher. Saudi Aramco is expected to announce January CPs by Dec. 31.

February ICE Brent crude futures fell 52 cents/b, or 1%, from the 0430 GMT close on Dec. 24 to stand at $51.16/b at 0300 GMT Dec. 28.

GASOLINE

** The January FOB Singapore 92 RON gasoline swap slipped at the start of the trading week, opening 1.2% lower than the previous session around $54.31/b, amid lower crude prices and a slight weakening of US RBOB/Brent crack.

** The market in week starting Dec. 28 will focus on China's first round of refined oil product export quotas for 2021, with industry participants expecting volumes to be little changed from 2020. China's Ministry of Commerce allocated a total 24.56 million mt under the general trade route and the balance 3.44 million mt for exports under the processing trade route in the first batch of quotas for 2020.

** Interest will be on whether the Beijing government would extend the first round of quotas to more private refiners, especially after 1 million mt of oil product quotas had been allocated to Zhejiang Petroleum & Chemical. Since the allocation of quotas end-Nov, ZPC had been actively exporting gasoline cargoes, with at least 575,000 mt of gasoline exported from the refinery's home port of Zhoushan, according to cFlow, Platts trade-flow software cFlow.

** Against this backdrop, the supply-demand dynamic in Asia is expected to remain balanced this week, industry sources said. Although concerns regarding heavy Chinese export supply still persist, import demand from buyers in Australia and Malaysia are expected to increase following a strong rebound in domestic driving activity.

NAPHTHA

** The physical CFR Japan naphtha benchmark stood at $470/mt early Dec. 28, down $2.50/mt from the Dec. 24 Asian close from lower crude prices.

** Yet, sentiment for naphtha remained positive amid robust appetite from Asian steam crackers. The CFR Japan naphtha physical crack against front-month ICE Brent crude futures edged up to $86.30/mt in mid-morning trade Dec. 28, up from the over 10-week high of $84.90/mt at the Dec. 24 Asian close, Platts data showed. The crack was last higher on Oct. 13 at $89.325/mt, Platts data showed.

** Also reflecting market strength, cash differentials for spot paraffinic naphtha parcels have risen to a multi-month high and was assessed at $10.50/mt at the Dec. 24 Asian close, up 50 cents/mt on the day, against benchmark Mean of Platts Japan naphtha physical assessments, on a CFR Japan basis, Platts data showed. The CFR Japan cash differential was last higher on July 28 at $13.25/mt.

** In the paper market, brokers pegged the front month January-February Mean of Platts Japan naphtha swaps spread at $3.75/mt in mid-morning trading Dec. 28, stable from the Dec. 24 Asian close, Platts data showed.

LPG

** Front-month January CP propane swaps notionally indicated Dec. 28 at $502/mt, versus $503/mt valued on Dec. 24. Butane CP swap was indicated $20/mt below propane, compared with $25/mt on Dec. 24.

** January-February CP propane swap backwardation indicated at $13.50/mt Dec. 28, versus $14/mt previous session, while February-March CP backwardation indicated at $20/mt steady to previous session.

** Traders expect Saudi Aramco's January propane CP to be set below December CP of $450/mt, although swaps were indicated higher. "January CPs are expected to be lower than December CPs," one trader said. "Indian and Chinese (lifters) recommended lower than swap value," he said adding Saudi Aramco is currently exporting more butane than propane, which may explain the premium of propane to butane. But a North Asian trader expects Aramco to set both January propane and butane CPs at $505/mt.

**If Aramco were to set January CPs around current swaps levels, this would be the eighth straight increase in term CPs, according to Platts data.