Asia light ends: Key market indicators for Sept. 13-17

Asia's light end markets rose in mid-morning trade Sept. 13, supported by firmer crude complex, amid lingering effects of Hurricane Ida on US oil production.

Gasoline is banking on improvement in driving demand from Indonesia and Malaysia, though this could be offset by COVID-19 curbs in Australia, New Zealand, and the Philippines.

Naphtha is expected to get support from steam crackers seeking to leverage rising ethylene-naphtha margins, while LPG is bracing for the onset of North Asian winter demand.

Front-month ICE November Brent crude futures stood at $73.19/b at 0354 GMT on Sept. 13, up 27 cents/b versus the previous close.

Gasoline

** October FOB Singapore 92 RON gasoline swap was pegged notionally around $80.05/b in early Sept. 13 trade, up 1.13% from the previous trading session, as lingering US supply-side disruptions supported the crude complex.

**Aside from the US Gulf oil production, supply-side disruptions extended onto the refining capacity, which as of early Sept. 13 has yet to see full recovery, albeit refineries such as ExxonMobil's Baton Rouge and Marathon's Garyville plants returning online.

**This prompted industry participants to expect further tightening to US gasoline stocks, which would likely keep US RBOB-Brent crack supported despite the upcoming change from summer-grade to winter-grade gasoline. US RBOB-Brent crack at 0230 GMT Sept. 13 was seen at $17.74/b, up 3.74% from the previous trading session.

*In Asia, participants are expected to eye demand-side drivers this week, with Indonesian and Malaysian driving activity trending upwards. Indonesia's state-owned Pertamina was heard to have begun seeking spot gasoline for October-loading dates, a bullish signal for the motor fuel complex. That said, the regional demand uptick was focused on oxygenated gasoline grades, with demand for non-oxygenated gasoline still poor due to strict movement curbs in Australia, New Zealand, and the Philippines.

Naphtha

** Naphtha C+F Japan cargo rose $9.25/mt day on day to $682.63/mt in mid-morning trade Sept. 13, from Sept. 10 Asian close, on an upswing in crude.

** Brokers pegged front-month October-November Mean of Platts Japan naphtha swap spread at $8/mt in mid-morning trade Sept. 13, 25 cents/mt wider than the previous session, S&P Global Platts data showed.

** Supply tightness from US Gulf Coast -- a source of arbitrage naphtha -- in the aftermath of Hurricane Ida had supported naphtha.

** The key ethylene-naphtha margin, tracked closely by steam cracker operators, climbed to 15-week highs, on tight ethylene supply. CFR Northeast Asia ethylene and C+F Japan naphtha spread widened to $406.625/mt at the Asian close Sept. 10, a level last seen May 28, when it was at $409.750/mt, Platts data showed. That was above the typical breakeven spread of $250/mt for integrated producers, and $300-$350/mt for non-integrated producers, and was likely to keep steam crackers operating at maximum capacity, sources said.

** Reflecting supportive naphtha demand, cash differential for spot naphtha with minimum 65% paraffin content gained $1.75/mt since the start of September to $4.50/mt Sept. 10, against benchmark Mean of Platts Japan naphtha physical, on CFR Japan basis, Platts data showed.

LPG

** Front-month October propane contract price swap was notionally indicated at $702/mt on Sept. 13, up from $697/mt Sept. 10.

** This is $35/mt more than the September term CPs, keeping it on track for the fifth consecutive rise ahead of the North Asian winter.

**October-November CP propane swap was in a $7/mt contango, from $5/mt contango in the previous session, which could support buying interest to stock up for winter. But November-December was indicated at a 50 cents/mt backwardation Sept. 13, versus parity the previous session.

**Saudi Aramco's acceptances of October-loading term cargo nominations are expected to be announced over Sept. 16-17. This followed the OPEC+ alliance's decision Sept. 1 to increase oil production by 400,000 b/d in October, sticking to plans to keep easing their output cuts.

**Qatar Petroleum and ADNOC had announced October term acceptances without cuts and delays, while Aramco's announcement is closely watched by Japanese and South Korean buyers following cuts and delays to five lifters for September loading amid recovering Indian demand, which together with ample supply of US propane and slower Chinese demand, have flattened the propane-butane spread.