Asia octane: Key market indicators this week

Singapore — The market for Asian gasoline blendstocks is expected to stay buoyant in the week started Jan. 31 as tepid gasoline blending activity could be offset by healthier Chinese buying as well as indirect support from non-gasoline markets pushing outright prices higher.

Mixed xylenes

** Demand for MX is set to improve as paraxylene producers mull production increases in line with improvements in the PX-naphtha spread and PX prices. The CFR Taiwan/China marker broke the psychological barrier of $700/mt to be assessed at $704/mt on Jan. 29, with the marker last assessed above the $700/mt mark on March 3, 2020, at $710.33/mt, S&P Global Platts data showed.

** PX producers are actively watching the PX-MX spread. An Asian producer said with the PX-MX spread above $100/mt, producers would seriously consider restarting MX-based capacity. On Jan. 29, the PX-MX spread widened to $105/mt from $85.50/mt.

** Looking ahead, further demand is also expected for March mixed xylenes cargoes, traders have said. Although blending demand in China is currently low, buyers are still looking for cargoes, which in turn has helped lift the FOB Korea mixed xylenes marker to $599/mt on Jan. 29, Platts data showed.

Toluene

** The Asian toluene market remained stable due to refineries operating at a reduced utilization rate and some demand in Asia, with healthier demand in the US alleviating the carefully watched supply-side pressure in Asia.

** The FOB Korea toluene physical averaged $550.40/mt in the week ended Jan. 30, an uptick from a $541.60/mt average in the week before and $530.40/mt two weeks prior.

** Still, the upside on the toluene front is being capped by weak blending economics in Asia due to continued sluggish gasoline demand.

MTBE

** The Singapore-to-China MTBE arbitrage window was noted to be workable, with the South China domestic MTBE import parity/FOB Singapore MTBE spread estimated at about $50.38/mt as of Jan. 28. At this level, traders would be able to fully cover the freight cost for a 3,000 mt cargo at high-$30s/mt.

** The open arbitrage window comes amid strong Chinese gasoline blending demand, which has helped the MTBE market to absorb cargoes, a trader based in China said.

** The FOB Singapore MTBE marker was assessed at $565/mt FOB Singapore on Jan. 29, up $5.50/mt from the previous week, Platts data showed.

Naphtha

** The Singapore reforming spread, which is calculated as the difference between FOB Singapore 92 RON gasoline and the FOB Singapore naphtha derivative, widened 25 cents/b on the week at $4.90/b at the Asian close Jan. 29, Platts data showed.

** The widening of the spread was driven by weaker sentiment in the Asian naphtha market, which edged down due to long supply for March delivery cargoes into north Asia from a robust Western arbitrage flow.

** The spread between CFR Taiwan/China paraxylene marker and CFR Japan naphtha physical widened $22.50/mt day on day at $192.125/mt on Jan. 29, Platts data showed.

** While margins have averaged higher in January to date at $171.61/mt compared with the December 2020 average of $153.19/mt, the spread remains below the typical breakeven $280-$300/mt. Market sources said this was unlikely to provide incentive for splitters to increase run rates yet.

Ethanol

** US ethanol delivered to the Philippines was assessed at $511.67/cu m on Jan. 29, up $7.67/cu m on the week, as a slightly bullish US Energy Information Administration production and stocks report for the week ended Jan. 22 spurred ethanol values higher.

** Inquiries for April delivery of ethanol cargoes were reported, with buyers in the Philippines preparing for second-quarter purchases and buying indications pegged at $480/cu m.

** The Philippines domestic ethanol price also edged up 0.8% at Peso 56.36/l ($1,550/cu m) in the first half of January from the previous half-month period, data released by the Sugar Regulatory Administration showed Jan. 27, driven by higher molasses and sugar price.