New York — Asia's light ends market opened March 8 supported by sustained crude futures rally, following a drone attack on Saudi Arabia's largest oil shipping port that stoked fears over global supply disruptions.
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Gasoline traders monitoring further tightening of light distillate supply in Middle East, even as Asia braces for improving demand with easing COVID-19 restrictions and improving demand-supply balance.
Asia naphtha supported by positive olefin margins, while Western arbitrage arrivals seen limited and LPG supply seen mixed.
Front-month May ICE Brent crude futures jumped $3.14/b from March 5 Asian close at $70.81/b.
*April FOB Singapore 92 RON gasoline swap strengthened early Mar. 8 by 5.09% from previous trading session, to around $76.29/b,
as crude rallied on news of the attack on Ras Tanura terminal.
*Gasoline traders on alert over possible disruptions in Middle East supply, which has already tightened over past few weeks, with light distillate inventories in UAE's Fujairah terminal having slumped to its lowest in three weeks at 7.143 million barrels March 1, Platts reported earlier.
*In Asia, normalization of activities continues, as countries set to gradually unwind strict lockdowns. Tourist attractions and public conventions now allowed to open around 50% to 75% occupancy rate in the Philippines , while Vietnam allowed reopening of non-essential businesses in Ho Chi Minh City. Driving activity in Indonesia, a key buyer of gasoline in Southeast Asia, is also expected to rise with vaccination efforts well underway from March.
*Demand for cargoes from Africa will also drive sentiment this week. Several long-range tankers heard placed on subjects to move gasoline from Asia to West Africa in March. This consistent outflow will help to improve regional supply-demand balances, sources said.
*Physical CFR Japan naphtha benchmark stood at $644.50/mt in early trade March 8, up $24.50/mt from March 5 Asian close due to higher crude.
* Sentiment was firmer with front month April/May Mean of Platts Japan naphtha swap spread at $10/mt in mid-morning trade March 8, said brokers.
This was 50 cents/mt higher than March 5 Asian close, when it was at $9.50/mt, Platts data showed.
* Naphtha demand firm on positive olefin margins supporting steam cracker runs at full or close to full capacity. Supply-side was tight due to limited Western arbitrage cargo arrivals.
* The key spread between CFR Northeast Asia ethylene and CFR Japan naphtha physical marked a two-year high on March 4, when it was at $589/mt. However, the spread edged down to $580/mt March 5 due to continued uptrend in naphtha, Platts data showed.
* Looking at LPG as an alternative cracker feedstock to naphtha, the CFR North Asia propane cargo spread to C+F Japan naphtha has fallen to more than five-month lows of minus
$16/mt at March 5 Asian close. It was last lower Sep. 25 at minus $16.375/mt, Platts data showed. LPG becomes viable as an alternative steam-cracker feedstock to naphtha when it is cheaper by at least $50/mt to naphtha.
* Front-month April CP propane swap notionally indicated March 8 at $616/mt, versus $594/mt valued March 5.
* April/May CP swap backwardation indicated at $42/mt March 8, versus $35/mt previous session.
* Supply seen mixed, with US Gulf loadings resuming after disruptions caused by cold snap and fog. But concerns over Saudi supply persists on expectations of further cuts in acceptances of April-loading nominations due by March 20 – following reductions in February and March -- with the kingdom agreeing to again cut crude production in April and following the drone attacks.
* Gap in Middle East supply expected to be filled by Qatar, which has announced acceptances without cuts but minor delays and also offered spot cargoes, while ADNOC expected to meet nominated volumes.
* Chinese PDH demand leads the way in Asia , focused on western supply.