Asia octane: Key market indicators for Dec 28-31

The Asian market for octane blendstocks is likely to remain tepid through Dec. 28-31 amid year-end trading lulls.

ICE February Brent crude futures stood at $78.88/b at 0330 GMT Dec. 28, up 3.76% from the close of Asian trade on Dec. 24.

Naphtha

** Asian naphtha market is slated to see ebbing demand from olefin makers with the onset of year-end holidays, however the recent uptrend in the reforming spread could attract gasoline blending demand.

** Demand for naphtha as a steam cracker feedstock is expected to take a hit as the key CFR Northeast Asia ethylene and C+F Japan naphtha spread narrowed $5/mt day on day to $308/mt at the Asian close Dec. 24, S&P Global Platts data showed. This was below the typical breakeven level for non-integrated producers of $350/mt and could prompt some steam crackers to reduce run rates, sources said.

** Margins in the aromatics sector were also thin, as the PX CFR Taiwan/China marker and the C+F Japan naphtha cargo spread remained at $149.33/mt at the Dec. 24 Asian close, below the typical breakeven of around $280-$300/mt, Platts data showed. This was a bearish factor for splitter run rates.

** A wide spread between naphtha and gasoline could stoke demand for naphtha in gasoline blending, as the reforming spread - the difference between Singapore 92 RON gasoline and Singapore naphtha derivative - widened by 48 cents/b day on day to $9.58/b on Asian close Dec. 24, Platts data showed. The spread was last wider on Oct. 29 at $9.56/b, Platts data showed.

MTBE

* Asian MTBE market discussion continued to be tepid ahead of the year-end festive season.

* The China-to-Singapore MTBE arbitrage window on paper is expected to remain open amid weaker China domestic MTBE prices.

* The MTBE gasoline blending value was estimated at around $156.8582/mt as of Dec. 28, according to Platts data.

Toluene

** Toluene to see slight support this week amid renewed spot discussions from South Korea buying.

** Rising crude prices help prop the overall weak toluene markets in Asia vis a vis other downstream markers.

** Domestic China is still slow in demand, but could see some interest prior to the Lunar New Year in January.

Isomer-MX

** Asian isomer-MX prices are likely to continue tracking crude oil and paraxylene prices in the week to come.

** With poor margins for MX production over the fourth quarter, producers have been trying to limit MX production, and with most aromatics not performing too well, gasoline production may seem a better option for producers, some market sources said.

** Domestic MX prices in China have been lagging international price levels although the East China MX inventory at 19,000 mt in the week ending Dec 24 was the lowest recorded level in over a year.

Ethanol

** US ethanol delivered to the Philippines climbed to $719/cu m on Dec. 24 from $690.67/cu m on Dec 19.

** While modest buying of fuel ethanol was reported for December in the Philippines, the week before, trading activities was slow.

** Demand for imported fuel ethanol in Asia was silenced by the limited number of participants, the bulk of whom had left their desk for the year-end holidays.

** "Vietnam is not buying, arbitrage to China from America is closed and Philippines' oil companies had completed Q1 purchases, leaving little need for buyers to chase offers," said a source.

** Elsewhere, due to the damage for Typhoon Odette exemptions to biofuel blending had been granted to provinces of Mindanao region, which will be lifted by the end of the state of calamity, says the Philippines Department of Energy in a statement.

** Trading was thin on the US front with most market participants away from their desks for the year-end holidays.