ASIA OCTANE: Key market indicators for July 4-8

Asian gasoline and its blendstocks are expected to soften in the week of July 4-8 on low demand from the US due to rising inflation, market sources said.

High gasoline prices were reportedly discouraging gasoline consumption in the US.

At 0300 GMT July 4, September ICE Brent crude oil futures were up 1.71% from the previous Asian close at $111.34/b, data from S&P Global Commodity Insights showed.

Naphtha

** Naphtha prices have been rising steadily, with Platts benchmark Naphtha C+F Japan cargo jumping $13.25/mt week on week to close at $831.75/mt July 1. The market was driven by stronger crude prices, reflected in the CFR Japan naphtha physical crack against front month ICE Brent crude futures, which went into positive territory of $10.73/mt July 1, versus minus $40.58/mt on June 30.

** The reforming spread, the difference between Singapore 92 RON gasoline FOB Singapore versus Singapore naphtha derivative, had fallen $8.97/mt on the day to $45.80/mt, S&P Global data showed.

** Front-month July-August Mean of Platts Japan naphtha swap time spread was in firm backwardation of $12.50/mt at the July 1 close. It closed at $7.25/mt on June 30, strengthening $5.25/mt day on day, S&P Global data showed.

** Market sources said the higher naphtha prices will likely suppress demand for cracker feed naphtha due to bearish margins for producing olefins from naphtha and low run rates from olefin producers.

** The spread between CFR Northeast Asia ethylene and CFR Japan naphtha physical was at $108.25/mt at the Asian close July 1, marking a 26-month low. It has been below the minimum breakeven level for integrated producers at $250/mt since May 13, S&P Global data showed.

MTBE

** Asian MTBE was expected to be on a downward trajectory, pressured by tapering arbitrage demand from Europe and the US as the summer driving season starts to slow. A steady supply of China-origin MTBE, as well as South Korean barrels, were likely to weigh on market fundamentals.

** Around 5,000 mt of MTBE loading from Jiangyin, China over June 26-July 5 was heading to the Straits, while another 5,000 mt of MTBE loading from Tianjin, China over July 14-17 was set to sail to Port Dickson, Malaysia. However, market participants expect demand to taper as the peak summer season draws to a close.

** South Korea's Hyundai Oilbank was heard to have offered around 5,000 mt per month of MTBE from Daesan for over July-December at around double-digit discounts to Mean of Platts Singapore MTBE assessments, FOB basis, according to market sources.

Toluene

** Toluene prices likely to ease further this week with demand from gasoline blenders and TDP users cooling off with weaker benzene-toluene and paraxylene-toluene spreads coming off sharply the last two weeks, trading sources said.

** "Gasoline market losing steam a bit. So the price support floor from blending is lower and naphtha seems to see a bit of recovery...China solvent demand hasn't really woken up yet. Will be a fight to find price floor for a while," another trader said.

** There has been more cautious buying sentiment from TDP/STDP users, industry sources said. The benzene-toluene spread was at $30.67/mt July 1, S&P Global data showed. The last time the spread was this low was Oct. 19, 2020 at $30.83/mt. PX-toluene spread at all-time low $100/mt at $20.33/mt July 1, S&P Global data showed.

Isomer-MX

** The outlook for Asian isomer-MX was heard bearish with traders expecting demand and prices to soften with the typical gasoline demand season gradually tapering and the possibility of arbitrage shipments to the US fizzling out, market sources said.

** Although price spreads with other regions remain very wide, shipment times are long and therefore risky, traders said.

** The paraxylene-MX spread was negative for most of the week ending July 3, and closed at minus $4.67/mt July 1. There is likely no spot demand from PX producers with margins at their worst since assessments for isomer-MX began in 2006, S&P Global data showed.

Ethanol

** With Q3 purchases completed in the Philippines, buyers might start making Q4 purchases to take advantage of the recent drop in fuel ethanol prices, market sources said. However, market participants also reported that bearish economic sentiment would also deter buyers from securing cargoes in fear of a drop in domestic demand.

** Platts Bioethanol CIF Philippines was assessed at $782/cu m July 1 against $818.33/cu m June 24, down $36.33/cu m, S&P Global data showed, amid weakness in US ethanol and CBOT corn futures.

** US ethanol stocks shed 730,000 barrels in the week ended June 24 at 22.746 million barrels, according to the Energy Information Administration data released June 29.