The Asia light ends market was firmer during mid-morning trade June 21 in line with crude futures, as the gasoline crack spread was supported by the US RBOB-Brent crack amid concerns over the impact of Tropical Cyclone Three, though regional auto gas demand is limited by COVID-19 movement restrictions.
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The LPG market is also getting some support from concerns over lower Saudi supply for July.
Front month ICE August Brent crude futures was at $73.89/b by 0336 GMT June 21, up 38 cents/b versus the previous close, S&P Global Platts data showed.
**July FOB Singapore 92 RON gasoline swap looked to kick off the trading week higher. Early June 21, it was notionally pegged around $79.92/b, up 2.59% from the previous session, as the US RBOB-Brent crack was buoyed by late June 18 concerns over the tropical cyclone, while crude held higher, shrugging aside concerns over a stronger dollar.
**US RBOB-Brent crack stood at $17.71/b at 0200 GMT June 21, up for the second straight session and representing a 6.69% rise from the previous session. However, with the impact of the storm weakening following landfall late June 19, its support is set to ease this week, sources said.
**In Asia, participants eye possible extensions and fresh lockdowns due to COVID-19. Malaysia, which is under a new phase of strict lockdowns until June 28, could see its third extension of movement curbs, with the number of new cases as of June 18 holding above 5,000. Malaysian gasoline buyers were heard to have already deferred some import cargoes over late June and early July, and another lockdown extension into mid-July could trigger further weakening in Asian gasoline fundamentals.
**Indonesia has seen another surge in COVID-19 cases over the past week, surpassing 12,000 for the first time since early February. State-owned Pertamina is expected to import around 8 million barrels of gasoline in July, down from around
9 million barrels in June as a result, market sources said.
**Physical C+F Japan naphtha rose $12.50/mt from the June 18 Asia close to be pegged at $644.625/mt mid-morning June 21.
**Firmer sentiment was reflected in swaps, as brokers pegged front-month July-August Mean of Platts Japan naphtha swap spread at $5.25/mt in mid-morning trade, up 25 cents/mt from the June 18 close, Platts data showed.
**Asian naphtha-fed steam crackers will likely start to consider reducing operating rates as margins for key olefins fell to negative territory, industry sources said. While new cracker startups had boosted overall naphtha demand, the resultant crunch in olefin margins would lead some crackers to have to reduce run rates, in turn capping demand for cracker-feed naphtha.
**The key CFR Northeast Asia ethylene spread to benchmark C+F Japan naphtha cargo has fallen below the typical breakeven of $250/mt for integrated producers, as the spread was assessed at $227.875/mt on June 18, down $32.625/mt day on day, Platts data showed. This is the first time the ethylene-naphtha spread has dipped below $250/mt since May 11, 2020, when it was $204/mt, Platts data showed.
**Front-month July propane contract price swap was notionally indicated at $605/mt June 21 versus $592/mt June 18.
**July propane CP swap was indicated $75/mt above butane. This points to a possible rise in Saudi Aramco's term July CPs for the second consecutive month when they are announced by June 30 after Aramco announced acceptances of term nominations for July-loading cargoes with initial estimates of three to five cargoes cancelled, reportedly following plant maintenance at the Saudi Ras Tanura refinery that has since resumed operations, sources said.
**Some sources said Saudi Aramco's butane portion in the acceptances may still be under discussions, while demand from India for evenly split cargoes for July and August may lend support to butane prices. This has briefly flattened the propane-butane spread from previous premiums of propane top butane. On June 21, July propane CP swap was indicated $1.50/mt above butane, according to brokers.
**Spot supply elsewhere from the Middle East is healthy, while Asia looks to improved flows from the US to meet Northeast Asian demand.
**July-August CP propane swap was indicated at a $10.50/mt backwardation from $7/mt the previous session, while August-September was at a $7.50/mt backwardation versus $6/mt the previous session.