The direction of Asia's light ends markets was mixed in mid-morning trade July 26, with gasoline driven up by a stronger US RBOB-Brent crack; though this may be balanced by ample Chinese exports in August.
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Register NowLPG was poised to see a third consecutive increase in term contract prices for August as swaps values remained firm at the start of the July 26-30 trading week, while naphtha was supported by crude oil even though end-user demand was muted.
Front-month ICE September Brent crude futures stood at $73.74/b at 11:47 am Singapore time (0347 GMT) July 26, down 36 cents/b from the previous close.
Gasoline
** The August FOB Singapore 92 RON gasoline swap inched higher July 26, pegged notionally around $82.53/b in early trade, up 0.72% from the previous session, supported by a stronger US RBOB-Brent crack and firm crude.
** The US RBOB-Brent crack, which Asian gasoline cracks closely trace, was nearing a four-year high at $22.00/b at 0200 GMT July 26. It was last higher on Aug. 31, 2017 at $31.83/b.
** Firm domestic demand, tightened inventories and steady vaccination rates in the US were keeping US RBOB futures bullish, industry sources said.
** In Asia, the continued delay of the announcement of China's second round of export quotas was expected to support the motor fuel complex. While industry participants anticipated the announcement being made in the last week of July, Chinese refiners have to plan August exports.
** Chinese oil companies were heard to be planning to raise August gasoline exports to 170,000 mt from the 30,000 mt they had planned in July. The increase was attributed to healthy regional gasoline cracks.
** Sinochem, Zhejiang Petroleum & Chemical and Sinopec were heard to be planning to export 100,000 mt, 40,000 mt and 30,000 mt of gasoline in August, respectively.
** However, dominant gasoline exporter PetroChina will likely skip product exports again in August, following low outflows by truck from its Yunnan Petrochemical refinery in July, several company refining sources told S&P Global Platts.
Naphtha
** The physical C+F Japan naphtha marker rose $1.50/mt from the July 23 Asian close to $683.13/mt in mid-morning Asia trade July 26.
** The Asian naphtha market has seen a muted start to buying for the current H1 September delivery cycle as end-users held back due to high prices. However buying activity is likely to pick up as it is the final week before the trading cycle shifts to the next half-month period.
** The firm naphtha market was seen in the CFR Japan naphtha physical crack against front-month ICE Brent crude futures, which touched a 5.5-year high of $130.075/mt at the July 23 Asian close, up $2.40/mt day on day and up $36.95/mt month on month. The crack was last higher on Jan. 7, 2016 at $131.975/mt, Platts data showed.
** However, weak buying activity by end-users has weighed on sentiment; the August-September Mean of Platts Japan naphtha swap spread backwardation narrowed to $9/mt in mid-morning trade July 26, down 25 cents/mt from the Asian close July 23, Platts data showed.
LPG
** The front-month August propane contract price swap was notionally indicated at $647/mt July 26, versus $648.50/mt valued July 23, and $27/mt above July term contract prices.
** The July propane CP swap was indicated at $3/mt above butane July 26, versus $4/mt the previous session.
** Prevailing CP swaps signal that Saudi Aramco is expected to raise August term CPs for the third month in a row in its July 29 announcement.
** Term lifters of Saudi LPG have been making recommendations into the August CPs over July 23-26, trade sources said.
** The expected rise in August CPs comes amid healthy demand from China and North Asia, though Indian spot demand was subdued and supply from the Middle East is ample, sources said.
** Relatively firm LPG prices have been keeping propane valued above naphtha for around two weeks. August FEI propane swaps were notionally indicated at a $5.30/mt premium to MOPJ naphtha July 26, compared with a $8.25/mt premium the previous session.
** Busy loading activity in the Middle East and US continues to push VLGC rates on the Ras Tanura-Chiba route toward $45/mt, around three-week highs.