Asia MTBE retreats to one-month low on oversupply fears

Author: Keven Zhang

2020/07/06

SINGAPORE (ICIS)--Asia’s methyl tertiary butyl ether (MTBE) fell to a one-month low, ending a five-week rally, on growing fears of an oversupply in the region.

In the week ended 3 July, spot MTBE prices have fallen to $411-429/tonne FOB (free on board) Singapore, according to ICIS data.

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Coronavirus-related lockdowns, weak gasoline consumption and gasoline supply length curbed demand for MTBE, with sporadic negotiations transpiring in the Asia Pacific.

Indonesia skipped its term gasoline supply for two months. It imports an average of 4m bbl/month of gasoline under a term contract.

Due to bearish sentiment, a few traders delivered spot MTBE cargoes to Singapore Straits traded at single-digit premium over FOB Singapore quotes, on CFR Singapore basis, compared with an $11-15/tonne premium reported earlier.

Vietnam is looking for 2,000 tonnes of August parcel due to upcoming turnaround at one of its refineries from mid-August to September.

In northeast Asia, Taiwan has announced a spot tender to buy 5,000-10,000 tonnes of August-delivery cargo.

However, the volume required by these markets was not sufficient to consume up all the incoming shipments.

Asia’s surplus cargoes could possibly head to China, which imported a massive 163,097 tonnes of MTBE in May, when the demand in the region was badly hit by the coronavirus pandemic.

China’s import arbitrage window, however, has been shut for seven weeks since mid-May, as domestic refinery operation was ramped up thanks to cheap crude oil imports.

Global crude supply were lower as OPEC+ continues with production cuts of 9.7m bbl/day and Saudi Arabia’s additional voluntary cut of 1m bbl/day, rendering support in crude oil price in June and July.

In the week ended 3 July, south China’s ex-tank prices rose to yuan (CNY) 3,900-4,100/tonne, or $461-484/tonne on import parity basis.

A wider spread between China’s import parity and FOB Singapore prices attracted market participants, but Chinese producers are keeping flexible operations, thereby maintaining a delicate market balance.

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“I am yet to see it [import arbitrage] happen, unless the spread could become wider,” said a Singapore trader.

Discussions for China's MTBE imports for end-July to early-August cargoes on a fixed-price basis range from $430-450/tonne. Floating-price bids were at FOB Singapore plus $20-25/tonne, while offers were at FOB Singapore plus $30-35/tonne, on a CFR China basis.

Focus article by Keven Zhang

($1 = CNY7.04)

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