May Pricing Recap - Asia & Middle East Light Ends

Asia and Middle East Light Ends market dynamics throughout May were heavily dictated by the Strait of Hormuz crisis, driving extreme price volatility across all three products. A brief late-month de-escalation occurred on May 25-26, triggered by reports of a negotiated 60-day ceasefire framework that included a 30-day target for de-mining the Strait. This sparked a sharp sell-off in Brent, dragging naphtha flat prices to monthly lows and pushing the naphtha crack into negative territory by month-end. However, these gains were short-lived; prices rebounded sharply after the White House clarified that President Trump had not yet signed the agreement. Sentiment further soured following US warnings to Oman regarding potential toll charges, and the prompt market tightened abruptly on May 28 following tit-for-tat drone and missile strikes between US forces, Kuwaiti defence, and Iran.

Naphtha Japan CFR average price softened 6.2% MoM to $967/MT as rerouted non-ME cargoes rebuilt availability and cracker margins turned negative, though the MEG physical premium over swaps collapsed from +$183/MT (April average) to +$37/MT (May average) by month-end — the sharpest single-month unwinding of the Hormuz premium.

Singapore 92 RON gasoline emerged as a market outperformer, climbing 3.0% MoM to average $131.61/bbl. This outperformance was primarily driven by crude prices retreating faster than refined products, pushing Singapore complex refinery margins to multi-year highs of approximately $30/bbl. Concurrently, the 95/92 octane spread compressed by 54% MoM, a contraction fueled by an influx of high-octane blending components arriving in Asia from non-Middle Eastern refiners to offset regional disruptions.

LPG was the starkest divergence: propane CFR Japan gained 3.3% MoM to $909/MT against a physical window, CFR Japan bids peaking at +$142/MT on 12-May with no offers or trades transacted; BLPG3 freight (USG to Japan) rose every week and reached $325.83/MT on 26-May with Panama Canal slot costs driving 43% of USGC-Asia VLGC voyages to reroute via Cape of Good Hope (Vortexa).

Market Activity

• Naphtha: Intermediaries failed to bridge the bid-offer gap; only 4 trades cleared from 65 active orders; sellers return 28-May with no buyers:
  
  • Naphtha CFR Japan window: 32 active bids vs 33 active offers through 26-May, only 4 of 65 active orders resulted in a trade (6% conversion); buyers and sellers failed to agree on price throughout the month.
  • All 4 trades for H1 Jul 2026 delivery at 25 MT lots CFR Japan; trade range of $131/MT between cheapest ($905/MT, 22-May, Glencore bought from ADNOC) and most expensive ($1,036/MT, 15-May, TotalEnergies bought from Vitol); note: the 22-May trade at $905/MT was transacted intra-window before the MOC close, while the GX end-of-day assessment for 22-May was $839.50/MT; the $65.50/MT delta reflects the sharp intra-session sell-off in the final minutes of the window on ceasefire reports.
  • Intermediary (sell side): Vitol Asia dominated with 21 active offers; positioning and arbitrage-driven flow from the largest independent trader in the window.
  • Intermediary/consumer (buy side): Glencore Singapore most persistent buyer with 15 active bids; Glencore also crossed to sell at $930/MT to BP Singapore on 7-May (H1 Jul delivery) and at $905/MT to ADNOC Global Trading Asia on 22-May (H1 Jul delivery), consistent with active book management rather than directional demand coverage.
• LPG: Consumer demand for prompt cover drove unbroken buy-side; zero producer or intermediary sell-side response throughout May:
  
  • The CFR Japan propane window (5-May to 26-May) produced zero offers, zero trades and an unbroken stream of bids; consistent with zero Hormuz-origin cargoes available for prompt delivery.
    
  • Bid premium escalation vs June CFR Japan delivery:
    
    • Early May (5-8 May): consumer/intermediary bids opened at +$92-108/MT vs June pricing (1H/2H Jun delivery, 23kt CFR Japan); already well above historical norms, confirming the market had fully absorbed the Hormuz disruption into prompt pricing.
    • Peak (11-12 May): intermediary bids: Trafigura at +$142/MT and SwissChemGas at +$141/MT vs June CFR Japan; highest bids seen in the window; no offers, no trades; GX assessed index subsequently peaked at $981.25/MT on 19-May as sustained buying pressure fed through into assessments.
    • Late May (15-20 May): Phillips 66 (producer/exporter) sustained bids at +$98-110/MT vs June CFR Japan daily even as naphtha sold off; US Gulf LPG supply to Asia remained constrained by freight and transit delays, not demand destruction.
  • US Export Constraints: spot LPG offers into the global market remain severely restricted as US Gulf Coast infrastructure operates at its limit; flexible export terminals aggressively diverted capacity away from ethane and into LPG loadings to capture premium margins; this operational shift, coupled with Middle East gridlock, left sellers unable to meet price expectations on the spot market; post-China holiday buyers subsequently cancelled multiple tenders, reinforcing that recent market inquiries were aimed at price discovery rather than active procurement.
• Gasoline: Producer flow from Middle East state refiners dominated; consumer intermediaries led buy side; 16 trades at $122-140/bbl:
  
  • 16 completed trades across 92 and 95 RON grades; fixed-price windows ran 24 active bids vs 10 active offers (2.4:1); Aramco Trading Singapore was the dominant seller (7 of 16 trades, producer flow), with ENOC Singapore (2), SK Energy International (1), and PTT International Trading (2) providing remaining sell-side depth; Unipec Singapore was the dominant buyer (7 of 16 trades, consumer/intermediary), absorbing both large 150kb 95 RON cargoes on Chinese state-linked demand.
  • 92 RON: month-high trade on 5-May at $137.10/bbl (Trafigura bought 100kb from Aramco Trading, delivery 22-26 May); collapsed to intra-month floor of $122.30/bbl by 8-May (Vitol bought 100kb from SK Energy, delivery 3-7 Jun) as early ceasefire rumours and crude weakness pulled prices lower; market recovered on renewed Iran tension, reaching a secondary peak with the $140/bbl trade on 18-May (Unipec bought 150kb 95 RON from Aramco Trading, delivery 11-15 Jun) before the 25-May macro sell-off returned GX-assessed 92 RON to $122.86/bbl; a choppy V-shape recovery and re-collapse; by 28-May, BP bid 92 RON at $115.70/bbl (delivery 17-21 Jun) with no trades — price discovery continues lower.

Price Action

• Naphtha: Japan CFR averaged $967/MT (-6.2% MoM); late-May sell-off as ceasefire framework reports triggered Brent collapse:
  
  • MEG LR1 FOB GX-assessed avg $846/MT (-7.3% MoM); Japan CFR avg $967/MT (-6.2% MoM); GX assessment: open $1,017.75/MT (4-May), high $1,039.52/MT (5-May), low $839.48/MT (22-May), close $754.50/MT (29-May.
  • Arrival of Western cargoes: early in the month, East Asian petrochemical buyers drew on alternative supplies; heavily rerouted arbitrage cargoes from NWE and the US (sailing around Africa via Cape of Good Hope) arrived in Asia, eroding the acute regional supply deficit and compressing the MEG LR1 physical premium over swaps from +$103.78/MT (4-May open) to +$36.94/MT (25-May close).
  • Naphtha Japan CFR crack vs Dubai: averaged +$4.84/bbl; turned negative at -$3.49/bbl (25-May) as ceasefire hopes sparked a crude sell-off; cracks remained negative through month-end despite the subsequent breakdown in peace talks and renewed clashes on 28-May, pinned down by spiking crude costs and widespread run cuts at Asian petrochemical crackers.

• Gasoline: 92 RON averaged $131.61/bbl (+3.0% MoM); V-shape intra-month with $122.30/bbl floor on 8-May and $140/bbl peak on 18-May:
  
  • GX-assessed 92 RON: open $133.46/bbl (4-May), high $137.46/bbl (18-May), low $122.86/bbl (25-May), close $112.40/bbl (29-May).
  • 92 RON crack vs Dubai averaged +$27.76/bbl (+26% MoM); crude fell faster than gasoline; Singapore complex refinery margins hit multi-year highs (~$30/bbl), strongly favouring maximised gasoline production over other fuels.
  • Chinese export quotas: no significant expansion in May, limiting Chinese gasoline outflows and supporting regional supply tightness; primary structural support for Singapore spot prices.
  • South Korea fuel tax cut extended through 31-Jul: the 15% domestic retail tax cut insulates South Korean consumers during the summer driving season, providing a demand floor that supports the Singapore 92/95 RON complex; highly lucrative Singapore complex margins (~$30/bbl) incentivised major South Korean refiners to maintain elevated CDU utilisation rates, ensuring baseline regional export liquidity remained fluid despite geopolitical supply constraints.
  • Octane gap (95 vs 92 RON): avg $5.10/bbl (Apr) to $2.31/bbl (May, -54%); near-zero $0.02/bbl on 4-May; peaked $3.34/bbl (11-May); settled $1.76/bbl final week; a wave of higher-octane blending components from non-ME refiners diverted exports into Asia to chase high Singapore prices, relieving the 95 RON premium while 92 RON stayed supported by robust regional blending demand.

• LPG: Propane CFR Japan averaged $909/MT (+3.3% MoM); held firm as Hormuz tightness sustained physical squeeze throughout:
  
  • GX-assessed index both peaked 19-May: Propane CFR Japan $981.25/MT, Butane CFR Japan $1,029.25/MT; Propane CFR Japan closed at $819/MT (29-May), Butane $864/MT; LPG sold off alongside naphtha into month-end but at a shallower rate, reflecting continued Hormuz physical tightness with Juaymah NGL facility restart date still uncertain.
  • M0/M1 FEI propane timespread (GX0000900): opened at $65/MT (4-May), surged to $98/MT on 19-May alongside the flat price high, then compressed and held steady at $70/MT through the final week of May; the flatness signals the prompt squeeze is no longer intensifying — the paper market's early warning that physical tightness is topping out, even before flat prices confirm it; consistent with cargo cancellations by both USGC exporters and Asian buyers reducing near-term demand pressure; a timespread that cannot make new highs when flat prices are still volatile is a structurally bearish signal for the prompt.
  • ARAMCO CP: June CP set at Propane $760/MT (+$10 vs May CP of $750/MT) and Butane $820/MT (+$20 vs May CP of $800/MT); consecutive monthly increases reflecting sustained Hormuz-driven supply tightness into June delivery; CP resets all term contract valuations globally on announcement.

Cross-Market Dynamics

• Petchem feedstock spread crossed zero; persistent negative cracker margins; gasoline top of the barrel:
  
  • Propane CFR Japan vs Naphtha Japan (GX0011849): avg -$151/MT (Apr) to -$52/MT (May); spread crossed positive in W3 (+$9/MT), peaked +$59.50/MT on 22-May, and closed further inverted at +$64.50/MT on 29-May; naphtha fell sharply while LPG held on supply tightness; the inversion forced flexible crackers to consider switch to naphtha.
  • Persistent negative cracker margins across Asia:
    
    • Asia ex-China (partial recovery): non-Chinese Asian crackers saw partial run-rate recovery in May as Western arbitrage cargoes arrived; Chandra Asri (Indonesia) lifted force majeure on 4-May buying alternative naphtha at steep premiums; Singapore's PCS remained under force majeure through month-end.
    • China (dwindling output): ethylene and PE/PP producers cut run rates in May; domestic cracker utilisation fell as operators could not pass high input costs through to weak downstream buyers.
    • Chinese PDH operators squeezed on both sides: high propane input costs and weak propylene output prices, with propane briefly costing more than naphtha on 22-May.
  • Gasoline crack +$27.76/bbl vs naphtha crack +$4.84/bbl; Singapore complex operators incentivised to maximise gasoline yield, reducing naphtha co-production and tightening naphtha supply further.

Cross-Regional Dynamics

• Eurobob outperformed Asia gasoline; BLPG3 arb strained as freight correction begins; India diversifying LPG supply:
  
  • E/W gasoline (SG 92 RON vs Eurobob E5 NWE, swaps $/MT): April near-parity (-$0.3/MT); May widened to -$49/MT avg; Eurobob outperformed Asia through most of May as European summer demand lifted NWE refinery margins; E/W converged to -$6/MT in W5 as both sold off equally on Brent weakness.
  • LPG Freight and Arbitrage Squeeze: BLPG3 (USG-Japan) hit an all-time record of $345/MT on 21-May before cooling slightly to $325.83/MT by 26-May; a massive routing pivot toward the Cape of Good Hope (43% of USGC-Asia VLGC voyages, Vortexa, record since Oct 2016, adding ~18 days vs Panama) alleviated Panama Canal bottleneck fees from their April peak of ~$4M; the combination of soaring freight and softening Asian demand crushed July USGC-to-Asia export netbacks from +16.20 cts/gal to below -5 cts/gal, forcing multiple cargo cancellations for late-June loading on both sides of the trade; transatlantic freight (Houston-Europe) also dropped $12.50/MT to $169.75/MT as cancellations released vessel supply.
  • LPG Sourcing Diversification: Indian state-run companies continue to actively secure evenly split LPG cargoes from the US Gulf on an FOB basis, with recent spot deals targeting early July loading windows; this highlights Indian buyers utilising their own time-chartered vessels to cover the ongoing shortfall of Middle Eastern cargoes; India also sourced cargoes from West Africa as an additional supply channel, further broadening flows away from ME Gulf.
  • Europe-Asia LPG divergence: European LPG markets remain well-supplied as US cargoes diverted to Europe fill the gap left by reduced ME flows; Asian LPG prices surging while European CIF ARA propane has softened; the divergence is structural, not transient, as long as Hormuz remains restricted and US terminal capacity is fully committed to replacing ME flows for Asia at high freight cost.

Curve Structure

• Bear steepening in naphtha and gasoline as Hormuz optimism weighed on prompt; bull steepening in LPG as prompt squeeze persisted:
  
  • Naphtha Japan CFR swaps (bear steepening): M1 fell -$158/MT (4-May to 28-May) while M12 fell only -$17.54/MT; M1-M2 compressed from +$58.00/MT to +$9.00/MT and M1-M12 more than halved from +$280.64/MT to +$105.95/MT; the front bore the full weight of Hormuz de-escalation optimism while the back held, signalling the market does not view Hormuz closure as permanently resolved.
  • Gasoline 92 RON swaps (bear steepening): M1-M2 compressed from +$5.93/bbl to +$4.50/bbl; M1-M12 compressed from +$39.06/bbl to +$24.01/bbl; curve shifted down more sharply at the front, consistent with prompt crude weakness flowing through to the front gasoline months.
  • Propane CFR Japan swaps (bull steepening): the only product where the curve steepened; M1-M2 more than doubled from +$34.75/MT to +$71.00/MT and M1-M12 widened from +$185.27/MT to +$236.73/MT; the front stayed elevated on zero seller participation and physical tightness while deferred months priced in gradual supply normalisation from US Cape voyages.
  • Across all three products, backwardation is easing but remains structurally positive: naphtha and gasoline curves flattened as Hormuz de-escalation optimism weighed on prompt; propane backwardation widened in absolute terms but the pace of M1 gains is slowing as cargo cancellations by both USGC exporters and Asian buyers signal deteriorating voyage economics; the common signal is markets repricing from acute prompt scarcity toward a more balanced, cautious near-term structure.

Price Volatility

• CV compressing from March shock peak but structurally elevated; naphtha most volatile at 8.05%:
  
  • Naphtha MEG LR1 most volatile in May at 8.05% CV; the $199/MT intra-month range driving dispersion; naphtha Japan CFR at 7.03%, both well above pre-shock levels and reflecting persistent Hormuz supply uncertainty.
  • LPG (propane 5.56%, butane 5.58%) running nearly identical CV; supply tightness from Hormuz keeping both elevated, with the propane/naphtha spread inversion adding volatility mid-month; gasoline 92 RON at 3.92% most stable of the three, consistent with the parallel curve shift and rangebound crack structure through most of May.

Something to Watch

• Naphtha Japan CFR crack vs Dubai: floor formation or further deterioration:
  
  • Observation: the Japan CFR crack averaged +$4.84/bbl in May but closed at -$3.49/bbl on 25-May; as seen on 28-May, a crude spike on renewed fighting while product demand lags destroys the crack rapidly from the denominator side.
  • Why it matters: if the crack stabilises and reverts above the -$3.50/bbl floor, it signals petchem buyers are returning and run-rate recovery is beginning; if it holds negative or deepens, naphtha demand destruction continues regardless of Hormuz status.
  • What to monitor: GX-assessed Japan CFR crack vs Dubai daily; NE Asian cracker operating rates at major hubs in South Korea (Daesan/Yeosu) and Japan (Chiba) — a fall below 70% utilisation traps cracks in negative territory.
• China second-batch export quotas: the key policy trigger for Singapore gasoline:
  
  • Observation: Beijing granted no significant commercial export quota expansion in May, which acted as the ultimate floor for Singapore spot prices; any Ministry of Commerce release of gasoline or diesel export quotas in June would instantly increase regional supply.
  • Why it matters: a second-batch quota release is the single most powerful bearish catalyst available to the Singapore gasoline complex — it redirects Chinese domestic surplus directly into the spot market and has historically compressed Singapore cracks within days of announcement.
  • What to monitor: Ministry of Commerce announcements on gasoline/diesel export quotas; any signals from Chinese state refiners on domestic inventory levels or refinery utilisation.
• BLPG3 freight correction and 2H June structural short:
  
  • Observation: BLPG3 retreated from all-time record $345/MT (21-May) to $320/MT; 3-5 late-June USGC cargoes cancelled as netbacks turned negative; Asian LPG buyers also heard cancelling US-Asia June loading cargoes as freight rates continue to soar; market remains structurally short for 2H June at odds with 52 spot VLGC fixtures loaded from the US in May.
  • Why it matters: if the 2H June physical short forces buyers back into the window at higher premiums, it validates the structural tightness thesis; if US cancellations continue and vessel availability expands, freight correction accelerates and the arb closes more deeply.
  • What to monitor: Cape VLGC fixture rates (Anfil/Vortexa weekly); additional June loading cancellations; Panama Canal water levels (El Nino probability 82%, NOAA).

Note: All figures, prices and market activity referenced in this report are based on the period 4-May to 29-May, 2026.