The Asia light ends market was steady to weaker in midmorning trade June 7. Gasoline cracks were supported by expectations of further growth in US summer driving demand, but countered by concerns of a dent in Southeast Asian demand amid the struggles with COVID-19 infections.
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Naphtha weakened due to softer crude futures, while north Asian LPG demand for July has yet to gather steam as traders wait for clearer signs of the reopening of the US arbitrage.
The front-month ICE August Brent crude futures was at $71.39/mt by 0401 GMT June 7, down 50 cents from the previous close, S&P Global Platts data showed.
** The July FOB Singapore 92 RON gasoline swap was steady in early-June 7 trading. It was notionally pegged around $77.22/b, marginally weaker than the $77.29/b assessed at the June 4 Asia close, with a firm US RBOB-Brent crack lending support amid slightly weaker crude.
** The US RBOB-Brent crack, which Asian gasoline crack spreads track closely, would likely remain buoyed through the week on expectations of increases in US gasoline demand during summer, further tightening gasoline supplies there, sources said.
** In the week ended May 28 — before the US Memorial Day holidays — gasoline stocks on the US East Coast, Midwest and the US West Coast were recorded below their respective five-year averages, the US Energy Information Administration data showed.
** In Asia, fundamentals remained dull amid a new coronavirus wave. Malaysia continued to record 7,000-8,000 daily infections June 1-6, Johns Hopkins University data showed, exacerbating concerns the country would likely extend its lockdown originally due to end around June 15.
** The week will see the award of several supply-side tenders, most of which were offered by Indian refiners.
** State-owned Indian Oil Corp. is due to award its tender of up to 32,000 mt of 92-RON gasoline for June 19-20 loading from Paradip on June 7. State-owned Mangalore Refinery and Petrochemicals Ltd. will conclude its tender for up to 25,000 mt of 95 RON gasoline for June 26-28 loading from New Mangalore June 8.
** The physical C+F Japan naphtha price fell $11.75/mt from the June 4 Asia close at $623.875/mt midmorning June 7 due to a fall in crude oil prices.
** Crude had fueled the benchmark C+F Japan naphtha price up to its highest in more than two-and-half years at $635.625/mt June 4, up $20.375/mt week on week, Platts data showed. This may have led to lackluster buying by naphtha end-users for the start of second-half July delivery in the week ended June 5, sources said.
** The softer sentiment was reflected in the swaps backwardation, as brokers pegged the front-month July-August Mean of Platts Japan naphtha swap at $5.25/mt in midmorning trade June 7, narrowing 25 cents/mt from the June 4 Asian close, Platts data showed.
** Although still above breakeven, the key CFR NE Asia ethylene spread to benchmark C+F Japan naphtha cargo had narrowed $25.375/mt week on week at $384.375/mt at the Asian close June 4, Platts data showed. This would prompt steam crackers to continue running at full or near-full levels due to positive margins, sources said.
** The front-month June propane contract price swap was notionally indicated at $545/mt June 7 versus $541/mt June 4.
** The June propane CP swap was indicated $7/mt above butane versus $9/mt the previous session.
** The July-August CP propane swap was indicated at a 50 cents/mt contango from a $2/mt contango the previous session, while the August-September was at a $2/mt contango versus $2.50/mt contango the previous session.
** Abu Dhabi National Oil Co is expected to announce acceptances of July nominations by endweek amid forecasts of no delays or cancellations — keeping Asia well-supplied with cargoes.
** Eyes were on signs of reopening of the arbitrage from the US for July-loading cargoes as freight continued to fall to around two-month lows.
** Arbitrage flows would help restore supply to north Asia, where petrochemical makers have yet to switch to LPG as an alternative feedstock. Recent purchases by Japanese and South Korean importers of July cargoes were not for petrochemical use.
** This was despite the FEI propane-Mean of Platts Japan naphtha discount hovering near $50/mt — normally the threshold for switch.
** A few traders said the arbitrage remains shut for now and cargoes persist at cancellation levels.