asia

Asia MTBE supply-demand imbalance to remain amid slow demand recovery


SINGAPORE (ICIS)–Asia’s methyl tertiary butyl
ether (MTBE) outlook appears bearish, with slow
demand and long supply expected to continue and
will likely maintain in relatively close
correlation with the gasoline and crude oil
markets in the near term.

In the week ended 25 September, spot prices
fell in the first half of the week and
rebounded by the end of the week, tracking
crude oil price movements.

The price rebound, however, saw resistance from
downstream end-users towards firm outright
prices, thus leading to lower premium levels
seen for trades in the Singapore market.

Spot cargoes for October arrival were heard
traded at an average of FOB (free on board)
Singapore prices with a premium of slightly
under $10/tonne on a CFR (cost & freight)
Singapore basis, compared with premiums of
$10-15/tonne in the week earlier.

A 5,000 tonne cargo headed for Malaysia was
traded at average FOB Singapore value plus a
premium slightly above $15/tonne on a CFR
Malaysia basis. Some short-covering activity
was seen in the market due to an upcoming plant
turnaround in the Middle East and southeast
Asia.

The weekly spot FOB Singapore prices were at an
average of $424.5/tonne in the week ended 25
September, according to ICIS data, while an
offer for an October FOB Singapore paper
contract stood at $418/tonne, reflecting a
backwardation between the September and October
market.

ICIS Editorial Chart goes here

On the downstream front, Asia’s gasoline crack
spread was strong, as the market drew
support from arbitrage outflows. Despite a slow
recovery from the coronavirus pandemic on a
global scale, the gasoline market saw demand
from regions such as north Africa and south
America.

However, a few developing factors could see
lower MTBE usage in gasoline blending.

As the weather turns colder, more regions are
expected to favour gasoline with specifications
suitable for winter usage. During the colder
period, gasoline blenders typically have lower
blending demand for MTBE and switch to
components with higher vapour pressure such as
C5.

A widening gasoline crack spread also may
stimulate the operating rates at refineries.
Refineries that produce more finished-grade
gasoline could reduce their dependency on
blended gasoline.

Thirdly, margins for octane blending remained
below levels deemed profitable, amid a narrower
price spread seen between 95 and 92 RON
gasoline and the spread between naphtha and 92
RON gasoline.

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More importantly, China’s import volumes could
be reduced by the closure of arbitrage window
seen since two weeks ago. Earlier purchases of
October-arrival cargoes may result in a supply
overhang in November if China becomes
self-sufficient for MTBE.

The chart below shows the arbitrage between
Singapore and China remains closed in the week
ended 25 September. The level for the arbitrage
to open is $35/tonne.

THBmN3dtbHo2NFBROVQwc0JaWjRrTVhZY3d3PQ2



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