Asia light ends: Key market indicators for Dec 27-31 - S&P Global

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At the start of the Dec. 27-31 week, Asia's light end markets were buoyed by gains in crude oil futures, as trading sentiment was upbeat amid eased omicron concerns.

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Gasoline supply-demand fundamentals were diverged, which may cap demand for naphtha as a blendstock even as the Singapore reforming spread had touched a near two-month high at the previous Asian close.

Many market participants are expected to be away from their desks for the year-end holidays, weighing on trading activity for light end products.

Front-month February ICE Brent crude futures stood at $78.73/mt at 0351 GMT Dec. 28, up from $76.02/b at the 0430 GMT Asian close on Dec. 24.

Gasoline

**The January FOB Singapore 92 RON gasoline swap rose at the start of the week, pegged notionally higher at around $89.06/b early Dec. 28, up 2.51% from the previous session, Platts data showed.

** Market sentiment for the week of Dec. 27-31 was mixed due to diverging supply-demand fundamentals amid bearish headwinds from the West.

** Some demand-side recovery emerged from Indonesia this week as Pertamina sought 200,000 barrels of HOMC 92 RON gasoline from the spot market for February 2022.

** On the flipside, India's Nayara was offering 33,000-35,000 mt of 92 RON gasoline for January loading.

** US gasoline inventories are expected to rise as refiners raise run rates, and the latest EIA report indicated a build of 5.53 million barrels for the week of Dec. 17. Gasoline supplied in the US is a proxy for gasoline demand.

** The US RBOB-Brent crack spread slid early Dec. 28 to $15.14/b at 0200 GMT Dec. 28, down 9.28% from the previous session.

Naphtha

** The physical C+F Japan naphtha marker rose $17.25/mt from the previous Asian session to be pegged at $739.25/mt in mid-morning trade Dec. 28 on gains in the crude complex.

** Weaker market sentiment, as reflected in the naphtha swaps, was in line with muted holiday trade activity. Brokers pegged front-month January-February Mean of Platts Japan naphtha swap time spread at $10/mt mid-morning Dec. 28, down 25 cents/mt from the previous close, Platts data showed.

**Demand for naphtha as a steam cracker feedstock is expected to take a hit as the key CFR Northeast Asia ethylene and C+F Japan naphtha spread narrowed $5/mt day on day to $308/mt at the Asian close Dec. 24, Platts data showed. This was below the typical breakeven level for non-integrated producers of $350/mt and could prompt some steam crackers to reduce run rates, sources said.

** The January East-West spread, the premium that CFR Japan naphtha cargo swap commands over the CIF NWE equivalent, was pegged by brokers at $9/mt, unchanged from the European close on Dec. 24, Platts data showed. The East-West spread had narrowed last week due to delays in Europe, as it previously ranged between $14-$15.75/mt earlier in December. Delays in Western arbitrage cargoes would typically boost Asian naphtha, however, the market was reportedly well supplied, with several offers heard for tenders last week.

LPG

** Asian LPG demand for heating is expected to ease as the market is due to move to purchasing H1 February delivery cargoes. Furthermore, a trader said South Korea was experiencing a warm winter.

** Front-month January propane CP swaps were indicated at $715/mt Dec. 24, up from $705/mt the previous session, surpassing the rise in crude. This is also $80/mt below December term CP, indicating firm sentiment for the January market.

** Strength was reflected in the swap spreads, as the January-February CP propane swap spread was pegged at a backwardation of $17.50/mt, $3.50/mt wider from the previous session, while February-March CP propane swap spread was at $28/mt, down slightly from 50 cents/mt the previous session.

** The front month FEI propane-MOPJ naphtha spread, which is watched closely by steam crackers, was $22.75/mt Dec. 24, up $5.75/mt from the previous session, eroding propane's viability as an alternative feedstock to naphtha. Steam crackers were considering butane, which was at a $35/mt discount to propane, market sources said. LPG is typically viable as an alternative feedstock when 90% or lower than the price of naphtha.

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