Asia octane: Key market indicators Nov 8-12

Improved demand in the naphtha and MTBE markets are poised to lead the Asian octane blendstock markets in the Nov. 8-12 trading week. Demand from India and Southeast Asia would likely support the toluene market, despite China domestic demand waning, according to trading sources.

Meantime, supply-side tightness has emerged in the naphtha and isomer-MX markets, according to sources.

ICE January Brent futures was assessed at $81.13/b at the Asia close Nov. 5, down 3.60% from the $84.16/b assessed the previous trading session.

Naphtha

** The Asian naphtha market fundamentals remained bullish on tight supply due to low arbitrage levels and positive olefins margins supporting naphtha demand as a cracker feedstock.

** The key CFR Northeast Asia ethylene and C+F Japan naphtha spread remained above the typical breakeven level of $300-$350/mt for non-integrated producers at $403.75/mt at the Nov. 5 Asian close, S&P Global Platts data showed. The positive margin would keep run rates at near-full or full levels, sources said.

** The key PX CFR Taiwan/China marker and the C+F Japan naphtha cargo spread widened $3.875/mt on the day to $141.25/mt on Nov. 5, Platts data showed. This was still below the typical breakeven of around $280-$300/mt, leading splitters to keep run rates low, sources said.

** Gains in naphtha outpaced that of gasoline as the reforming spread -- the difference between Singapore 92 RON gasoline and Singapore naphtha derivative -- narrowed 36 cents/b day on day and $2.42/b week on week at $7.14/b at the Asian close Nov. 5, Platts data showed. The narrowed reforming spread is likely to weigh on naphtha demand as a gasoline blendstock.

MTBE

** The Asian MTBE FOB Singapore marker is expected to be volatile in the week, amid fluctuating gasoline and crude oil markets.

** MTBE demand is expected to improve on the back of reopening countries in Southeast Asia, such as Malaysia and Vietnam.

** Higher refinery runs and increased gasoline blending activities in China would also likely support the MTBE market. Gasoline exports from China to Singapore in September spiked 471.01% on the month to 280,455 mt, after being in the doldrums in July-August, the latest customs data showed.

Toluene

** Toluene prices moved lower in line with upstream prices but see support from India and Southeast Asia, trading sources said. Despite the slowdown in trades as Diwali holidays in these regions have halted deals temporarily, there have been inquiries for cargoes from second-half November through to December, sellers said.

** The arbitrage to the US is not opened and not workable [yet], industry sources said. "I have not seen any cargoes moving there so far and Chinese demand [for toluene] has topped," said a Singapore-based trader.

** Domestic Chinese demand has wavered as gasoline production is ramped up and there are still healthy supplies ex-tank in east and South China, sources added. "The chemical demand cannot support the high level with [domestic] gasoline [prices] continuing to fall," a source said. Inventories in the east dipped marginally by 1,300 mt to 32,000 mt ex-tank and rose 700 mt to 10,400 mt in the south, sources said.

Isomer-MX

** China's import demand for isomer-mx is likely to be sluggish in the week to come as gasoline blending demand has slowed down after the news of a major east China refinery and petrochemicals producer going to ramp up production rates in the near term, with more gasoline and paraxylene expected to flow to the market.

** The PX-MX spread narrowed to $70.50/mt Nov. 5, the lowest level since June 8 at $66.17/mt, Platts data showed, another factor that may slow down demand for MX as margins for PX production remain negative.

** The low inventory level of MX in east China may be a supportive factor for MX, as may also the possibility of arbitrage shipments to the US, with the price spread between FOB Korea and US Gulf Coast at more than $100/mt on Nov. 5.

Ethanol

** US ethanol delivered to the Philippines climbed to $818.67/cu m on Nov. 5 against $742.33/cu m on Oct. 29.

** Ethanol production for the week ended Oct. 29 averaged 1.107 million b/d, its highest level since early December 2017, with stocks gaining 204,000 barrels to 20.129 million barrels, the US Energy Information Administration data showed Nov. 3.