Asia light ends - Key market indicators this week

June ICE Brent crude futures rose 50 cents/b from Friday's 0830 GMT Asian close to $21.40/b at 0300 GMT Monday amid signs of production cuts, but supply cuts were deemed insufficient to balance out demand destruction stemming from the coronavirus pandemic.

LPG

Propane May CP swap was notionally indicated Monday at $317/mt, up $5/mt from Friday's close.

Ahead of Saudi Aramco's announcement of May Contract Prices expected on Thursday, traders forecast propane around $300-$320/mt and butane at around parity or $10/mt below propane. This would be about $60-$80/mt above the April CPs and the first increase after three months of declines.

While the rebound reflects the recent demand recovery from China, India and Indonesia, traders are watching if imports have been satisfied and if they might pause.

With current robust propylene margins, Chinese PDH plants could maintain steady propane consumption.

With ample supply of mixed cargoes from the US and firm regional propane demand, butane is expected to stay below propane prices. Saudi supply cuts are also keeping May CP swap around double digit premiums versus Western CFR cargoes.

Firm prompt market sentiment widened May/June backwardation notionally to $48/mt Monday morning versus $39/mt Friday.

GASOLINE

May FOB Singapore 92 RON gasoline derivative rose to around $18.70/b Monday morning, recovering from the $17.75/b at Friday's close, underpinned by stronger crude.

Asian gasoline fundamentals are however slated to weaken, as impact of further lockdown extensions in the region hits this week.

The Philippines announced Friday that its capital Manila would remain under lockdown until May 15, while Indonesia will extend transport restrictions until May 22. Since Friday, Indonesia had banned city workers from travelling home for Ramadan -- a time when gasoline demand typically peaks.

Traders expect positive US gasoline demand data again this week, but news that Mexico has curbed gasoline imports cast doubts over the US and Asian gasoline supply outlook.

NAPHTHA

The CFR Japan naphtha physical benchmark opened Monday at $200/mt, down $7.75/mt from Friday's Asian close, bucking gains in crude futures as the CIF Northwest Europe naphtha crack fell, dragging down Asia in turn.

The contango on the May/June Mean of Platts Japan naphtha swap spread deepened by 25 cents/mt from Friday's Asian close to minus $3.50/mt Monday morning.

The East/West spread between May CFR Japan naphtha and CIF NWE naphtha softened Monday morning to $57/mt, down $1/mt from Friday's Asian close as the European naphtha complex was weighed down by oversupply of cargoes due to a lack of vessel and storage availability.

Naphtha remains in demand by Asian steam crackers, most of which are operating at close to full capacity due to favorable propylene margins.

Cash differentials for FOB naphtha tenders will likely maintain its upward momentum this week as record high freight pressured down the FOB Arab Gulf naphtha outright price. The FOB AG naphtha cash differential was assessed at plus $20/mt on Friday, up $10/mt day on day.