Asia octane: Key market indicators this week

The Asian naphtha market was expected to lead octane blendstocks for the second straight week in the trading week starting May 31 due to the impending startups of new crackers in the region.

However easing Chinese gasoline and blending demand was expected to add to weight on Asian toluene and isomer-MX markets in the coming week, while the Asian ethanol complex was expected to face headwinds from higher US ethanol supply.

Naphtha

** Buying interest in the Asian naphtha market was expected to remain firm with the start of the new H2 July trading cycle June 1 on growing demand by Asia's petrochemical producers due to new cracker startups.

** Reflecting the firming sentiment, the front-month June-July Mean of Platts Japan naphtha swap spread widened 75 cents/mt week on week to $6.50/mt at the Asian close May 28, S&P Global Platts data showed.

** However the Singapore reforming spread -- the price difference between Singapore 92 RON gasoline and Singapore naphtha derivative – slipped amid retreating gasoline demand to $9.25/b at the Asian close May 28, Platts data showed.

MTBE

** The Asian MTBE complex is expected to remain supported this week by stronger Chinese buying ahead of the imposition of a new consumption tax on light cycle oil and mixed aromatics imports from June 12.

** However while China's MTBE demand was expected to increase, demand from Southeast Asia will likely face headwinds as Malaysia and Vietnam are set to re-impose stricter pandemic movement restrictions this week for at least two weeks.

** The MTBE gasoline blending value was estimated at around $94.5486/mt May 31, Platts data showed.

Toluene

** The Asian toluene market was expected to remain on a downward trend this week and trading activity thin as blenders continue to shun the high-octane blendstock.

** The poor demand for toluene among Asian blenders comes as the price of toluene remains too high to be considered economical. The FOB Korea toluene physical marker stood at $740/mt at the close of Asian trade May 28, remaining higher than the FOB Singapore MTBE price at $733.50/mt, according to Platts data.

** Buyers in East China, a domestic blending hub, have also stayed on the sidelines, with stockpiling activity seen muted, according to industry sources.

Isomer-MX:

** The Asian isomer-mx complex was expected to weaken this week, tracing the slowdown in gasoline blending demand.

** That slowdown was the result of easing domestic gasoline demand after a holiday-driven spike in early May. The East China ex-tank price for June was around Yuan 5,770-5,790/mt, or about $773.90/mt on an import-parity basis, and for July was around Yuan 5,780-5,800/mt, according to Platts data.

** The isomer-MX spread to naphtha narrowed $41.63/mt on the week to $149.75/mt May 28, while its spread to paraxylene widened $13/mt to $62.67/mt.

Ethanol

** The Asian ethanol complex was set to face downside pressure this week from non-Asian sources, with rising production in the US in particular weighing on sentiment.

** US ethanol production averaged 1.011 million b/d in the week ended May 21, edging down 21,000 b/d from the week before but surging 287,000 b/d year on year, Energy Information Administration data showed May 26.

** Adding to the weakness, demand from the Philippines remains lackluster as buyers continue to stay on the sidelines, having delayed the lifting of ethanol cargoes in Q3 despite gasoline demand rebounding to levels seen in March.

** US ethanol delivered to the Philippines fell to $719.33/cu m May 28 from $727.33/cu m the week before, Platts data showed.