Asia light ends: Key market indicators this week

Singapore — The Asian light ends market opened the week starting March 29 on a mixed note, with gasoline and naphtha posting gains late last week due to stronger crude prices while LPG softened amid ample Middle Eastern supply.

Asia gasoline could be boosted should Indonesia's Pertamina emerge to buy spot April cargoes following a fire at its 125,000 b/d Balongan refinery early March 29, while naphtha supply is tightening due to delayed arbitrage shipments from the west to Asia amid the Suez Canal logjam.

Market participants expect Saudi Aramco to lower its April contract prices for propane and butane after eight to nine months of straight gains due to ample Middle East supply and losses in the crude complex. The CPs are due to be announced on March 31.

Gasoline

** The April FOB Singapore 92 RON gasoline swap rose in early March 29 trading, opening 1.77% higher from the previous session at around $70.40/b, on the back of a crude complex that remained supported by the extended blockage of the Suez Canal.

** Industry participants are assessing the impact of Pertamina's Balongan refinery fire on the market. State-owned Pertamina has announced that a fire broke out at the 125,000 b/d Balongan refinery complex early March 29, forcing the plant to shut in order to "control the flow of oil and prevent the expansion of fires".

** Pertamina was previously expected to import only around 8 million-9 million barrels of gasoline in April, but could emerge in the spot market to purchase more cargoes should there be a need to replace output lost due to the fire, industry sources said. A boost in buying from Indonesia would be bullish for the Asian gasoline complex, which has been enjoying a wider recovery in regional demand as many countries ease movement restrictions on falling COVID-19 infection rates.

** Outside Asia, improving fundamentals in the US will help keep sentiment steady. The US RBOB-Brent crack has jumped to summer highs, with more upside ahead as driving activity continues to rise amid a refining landscape still scarred by February's deep winter freeze. At 0230 GMT March 29, the US RBOB-Brent crack stood at $18.44/b, only marginally lower than the $18.80/b at the close of Asian trade March 26.

Naphtha

** The physical CFR Japan naphtha benchmark stood at $579.50/mt in early trade March 29, up $1.75/mt from the Asian close March 26.

** Sentiment was softer, with the front-month April-May Mean of Platts Japan naphtha swap spread at $7.75/mt in mid-morning trade March 29, according to broker indications. This was 75 cents/mt lower than the March 26 Asian close, when it was at $8.50/mt, Platts data showed.

** Asia's naphtha market was tighter on the back of delayed Western arbitrage shipments unable to pass east-bound through the Suez Canal from Europe. This has drawn US arbitrage shipments, for which fixtures for 174,000 mt of cargo were heard placed on subjects loading over March 30-April 1, sources said.

** The key spread between CFR Northeast Asia ethylene and CFR Japan naphtha physical was assessed at $472/mt March 26, down $8/mt day on day as naphtha prices strengthened, Platts data showed. However the spread remained above the $350/mt breakeven spread for non-integrated producers.

LPG

** The front-month April CP propane swap was notionally indicated March 29 at $567/mt, versus $571/mt valued March 26.

** The April-May CP swap backwardation was indicated at $47.50/mt March 29, versus $50/mt previous session.

** Saudi Aramco is due to announce its April Contract Prices March 31, with traders expecting the propane CP to be in the range of $560-$595/mt and butane $520-$565/mt. The March propane CP was set at $625/mt and butane at $595/mt.

** If Aramco were to set its April CPs within the expected ranges, it will be the first fall after nine straight months of increases for propane, and eight consecutive rises for butane, reflecting the pressure faced by Middle East market, with ample supply from Qatar, Kuwait and ADNOC offsetting shortfalls from Saudi Arabia in line with kingdom's crude production cuts over February-April to meet OPEC+ commitments. Saudi propane supply has also tightened due to domestic petrochemical demand.

** Spot demand from India and Indonesia remains paused, as these mixed LPG consumers depend on term supply. This is keeping the premium of propane to butane at between $35/mt and $40/mt.