Singapore—Prices fell across Asian light ends fell markets in mid-morning trade Jan. 18, tracking softer crude prices, as the spread of mutated strains of COVID-19 weighed on sentiment.
Gasoline was under downward pressure as Indonesia's February demand was seen sagging further, while exports from China could increase as domestic demand softens amid fresh lockdowns to control the pandemic.Naphtha was being supported by robust steam cracker demand as H1 March trading kickstarts in the week starting Jan. 18, while the February LPG market was being underpinned by a harsh North Asian winter.
Front month March ICE Brent crude futures fell $1.07/b from the Jan. 15 Asian close to stand at $54.66/b at 0300 GMT Jan. 18.
GASOLINE** The February FOB Singapore 92 RON gasoline swap opened Jan. 18 at around $58.60/b, 1.27% lower than the previous trading session, as the downward momentum in international crude markets gained pace amid the spread of new strains of COVID-19 across the world.
** In Asia, concerns over the spread of the new wave of COVID-19 infections was centered on China, which recorded 109 new cases Jan. 17, the sixth consecutive day that new cases surpassed 100. While industry sources expect the outbreak to be contained by fresh lockdowns across several provinces, muted domestic demand over the upcoming holiday season could prompt some refiners to raise export volumes in the near term.
** Focus will turn to exports from privately held Zhejiang Petroleum & Chemical or ZPC, which received 2 million mt of export quota during the first round of allocations for 2021, and is known to raise export volumes to balance domestic inventory pressures, sources said.
** The regional import demand outlook has also been marred by new waves of COVID-19 across Asia. Indonesia, Southeast Asia's largest buyer of gasoline, is expected to only import around 8 million barrels of gasoline in February, down for the second straight month. Expectations for any demand uptick in the coming months is grim, sources said, noting more lockdowns could be on the horizon due to high infection rates in the country. Indonesia's COVID-19 infections hit a record high of 14,224 cases Jan. 16, John Hopkins University data showed.
NAPHTHA** The physical CFR Japan naphtha benchmark stood at $516.50/mt in early trade Jan. 18, down $12.125/mt from the Jan. 15 Asian close, tracking lower crude prices and as the market rolled into a new trading cycle.
** Naphtha end-users were expected to begin purchasing H1 March delivery cargoes this week, following the half-month roll.
** Firm sentiment was reflected in the swaps market backwardation, as brokers pegged front month February-March Mean of Platts Japan naphtha swap spread at $6.75/mt in mid-morning trade Jan. 18, widening from $6.50/mt at the Jan. 15 Asian close, Platts data showed.
** Supported by robust demand from Asian steam crackers, the physical CFR Japan naphtha crack spread against front-month ICE Brent crude futures reached a near 2.5 year high of $110.65/mt at the Jan. 15 Asian close. The physical crack was last higher on Aug. 2, 2018, at $112.125/mt, Platts data showed.
LPG** Front month February CP propane swaps were notionally indicated in mid-morning trade Jan. 18 at $617/mt, versus $627/mt at the Jan. 15 close. This keeps Saudi Aramco on track to raise February term propane Contract Prices for the seventh consecutive month. Butane CP swaps were indicated $40/mt below propane, unchanged from Jan. 15, reflecting North Asia's healthy propane demand during a severe winter, while the pause in Indian imports pressured butane.
** Sources said evenly split cargoes were ample, keeping FOB Middle East discounts at double digits as end-users fret over the high CPs.
** February-March CP propane swap backwardation was indicated at $22/mt Jan. 18, versus $19/mt the previous session, while March-April CP backwardation was indicated at $63/mt versus $58/mt the previous session.
** Saudi Aramco's acceptances of February-loading term nominations are due Jan. 20, with some traders expecting cuts after the kingdom's decision at the Jan. 5 OPEC+ meeting to limit February and March crude output. ADNOC's acceptances came with no cuts, but some loading delays.
** Physical CFR trading has shifted to March-delivery cargoes, with the backwardation remaining wide.
