The Asian light ends market started the week on a firmer footing, as gasoline and naphtha demand make a gradual recovery while refinery turnarounds tighten supply.
The markets were also bolstered by stronger crude oil futures. August ICE Brent crude rose $2.55/b from the Asian close on May 29 to $37.87/b at 0300 GMT June 1.
GASOLINE
** July FOB Singapore 92 RON gasoline swaps opened June 1 at around $37.75/b, up 6.64% from the previous trading session as a more measured response from US President Donald Trump regarding US-China
relations injected support.
** The strength was also reflected in the US RBOB/Brent crack, which rose to $7.62/b at 0300 GMT on June 1, 8.78% higher than the previous trading session.
** Regional sentiment is expected to improve this week as supply tightens with refineries going on turnarounds. South Korean refiner S-Oil Corp. is slated to idle the 76,000 b/d residue fluid catalytic cracker at its
Onsan facility for about two months starting this week. South Korea's SK Energy, Taiwan's CPC, Japan's Cosmo Oil and JXTG either shut units end-May for maintenance or are preparing to shut early June.
** Demand is also expected to gradually recover with the easing of more lockdown measures. Starting Monday, Philippine cities such as Manila will begin "relaxed quarantine" while Thailand moves into its third stage
of easing, allowing schools, theaters, and other facilities to reopen.
** But tepid Indonesian demand is expected to cap the potential upside, with the imminent restart of Pertamina's 260,000 b/d Balikpapan refinery heaping some downward pressure.
LPG
** After Saudi Aramco set June term Contract Prices in the mid-range of market expectations -- at $350/mt for propane and $330/mt for butane -- the new front-month July CP swaps was notionally indicated June 1 at $330/mt for propane, up $25/mt versus the previous session, and $310/mt for butane, up $15/mt.
** Traders said the cut in Saudi acceptances of June-loading term cargo nominations impacted propane more than butane, even as the market continued to eye spot offers from Aramco and ADNOC, while the
Iranian June-loading program is expected at around eight cargoes, mainly China-bound.
** Sufficient Western CFR cargoes are expected to be on offer for July deliveries with demand largely seen from trading firms. With availability of Western cargoes and relative tightness of FOB supply, the July FEI/CP propane swaps hovered at just plus $1/mt.
NAPHTHA
** The CFR Japan naphtha physical benchmark opened June 1 at $318.75/mt, up $21.375/mt from the Asian close on May 29, led by higher crude.
** Purchasing for H2 July delivery naphtha began May 29 and is set to move into full swing this week.
** The June/July MOPJ naphtha swap timespread flipped into positive territory on May 27 after almost 11 weeks in a contango, and was assessed flat over May 28-29 Platts data showed. In mid-morning trading, brokers pegged the spread higher at plus 25 cents/mt.
** Asian steam crackers are mostly expected to run at full capacity in June amid positive petrochemical margins, however, softer ethylene prices narrowed the key CFR Northeast Asia ethylene and CFR Japan naphtha physical spread to $412.875/mt at the Asian close on May 29, down $13.75/mt on the day, Platts data showed. The spread has been above the typical breakeven spread of $350/mt for non-integrated producers since May 22, Platts data showed. The spread between FOB Korea propylene and naphtha C+F Japan cargo assessments was $422.875/mt at May 29's Asian close, down $3.75/mt on the day, Platts data showed.
