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Watch: Market Movers Asia, Jul 6-10: Mideast Aug official selling prices in focus; LPG discount to naphtha widens

The highlights on S&P Global Platts Market Movers Asia this week, with Editor Tess Tseng:

** Market participants expect Saudi Aramco, ADNOC to raise August official selling prices amid stronger crude price structure

** LPG seen as choice feedstock for steam crackers

** BP's sale of petrochemicals business to Ineos to have minimal impact on markets

Also in this episode: Seaborne iron ore prices are seen to be under pressure on lower demand, LNG demand fundamentals remain weak, and Platts launches Asia price assessments for R-PET or recycled polyethylene terephthalate as the demand for recycled plastics in the region grows.

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Market Movers Asia, Jul 6-10: Mideast Aug official selling prices in focus; LPG discount to naphtha widens

This week: LPG continues to attract steam crackers, LNG demand fundamentals remain weak, and iron ore prices come under pressure.

But first, oil importers in the region will be closely monitoring official selling price announcements from key Middle Eastern crude producers. An S&P Global Platts survey showed that market participants expect Saudi Aramco and Abu Dhabi's ADNOC to raise OSPs in August – the third month in a row – on the back of a strong uptick in the region's benchmark crude price structure.

With higher prices, combined with an uncertain fuel demand recovery outlook, Asian refiners would remain cautious not to overcommit their feedstock purchases, while keeping a lid on fuel output volumes.

Speaking of cautious buying, demand fundamentals remain weak in the LNG markets. Any confidence in a rebound has been overshadowed by new outbreaks of COVID-19 in some parts of the region.

An improvement in netbacks for US Gulf Coast LNG to Asia from September onwards has also increased the chance of more US LNG cargoes arriving in the region. But Platts Analytics said US cargoes hitting the water before demand ramps up into winter is a distinct downside risk for LNG prices, especially if Asian demand fails to pick up in the coming months.

In petrochemicals, producers in North Asia and Southeast Asia are loading up on LPG to take advantage of the feedstock, which is now cheaper than naphtha.

This move is seen as a profitable option for refineries, as light feed cracking increases the production yield for ethylene and propylene, both of which are expected to boast healthy margins in July.

Still in petrochemicals, UK-based petrochemical giant Ineos will acquire all of BP's petrochemicals businesses, which produced 9.7 million mt of products in 2019.

Sources said the long-term impact of the sale will hinge on which of BP's petrochemical businesses Ineos focuses on, which for the moment is unclear. For now, they are expecting the transaction to have a minimal impact on the market.

An excess of supply of benzene and slow demand recovery for paraxylene has pressured margins to naphtha to record lows. This has prompted refineries across Asia to reevaluate their production plans for July.

For our social media question this week: Do you expect this trend in the aromatics market to continue this quarter? Share your thoughts with #PlattsMM.

Now with an increasing demand for recycled plastics in the region, Platts has launched new Asia price assessments for recycled polyethylene terephthalate. This aims to provide greater price transparency and completes Platts' global coverage for the market, in addition to existing assessments in Europe and US.

In metals, the market is focusing on seaborne iron ore prices, which have been around $100/mt CFR China since end-May. On one hand, the price may under pressure due to softer Chinese domestic steel prices and slower demand due to the rainy season. On the other hand, July stocks are seasonally tight, with low exports from Australia. Miners usually rush to export as much as possible before the end of the Australian financial year on June 30. A short supply could help to offset any weakening of demand.

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Thanks for kicking off your Monday with us. Have a great week ahead!