Crude oil futures moved up on Wednesday on a report by the American Petroleum Institute indicating a larger draw in United States crude inventories than anticipated. However, numbers eased following news that U.S. President Donald Trump had fired National Security Advisor John Bolton as they disagreed on the president’s plan to lift sanctions on Iran and schedule a meeting with Iranian President Hassan Rouhani.

Brent futures did not show significant fluctuations week on week. On Sept. 12, Brent November futures were trading at $60.45 per barrel on the London-based ICE Futures Europe exchange, and were hovering at $60.48/bbl on Sept. 5.

Base oil demand has slowed down in Asia as is typical for the third quarter, but this year, the situation has been exacerbated by murky prospects in the downstream lubricants segments due to the ongoing trade dispute between the U.S. and China, coupled with other geopolitical and economic pressures.

However, the U.S. and China this week appeared willing to take steps towards reaching an agreement, as negotiators prepare for the resumption of talks in Washington in the coming weeks.

On Wednesday, President Trump said he was postponingthe imposition of 5 percent extra tariffs on Chinese goods by two weeks, meaning Chinese officials can celebrate their Oct. 1 National Day without facing new tariffs, Bloomberg reported.

The Chinese domestic lubricants market witnessed a slowdown in requirements during the months of July and August, with some plants heard to have trimmed operating rates for base oil production, while ramping up gasoil output due to higher profitability levels. However, there were reports that base oil production rates were slowly being increased.

In Japan, manufacturers that supply the automotive segment were concerned about the potential downturn in demand as the country’s government is due to implement an increase in the consumption tax, which could dampen sales.

Demand for cars and houses has not picked up noticeably in the run-up to the 2 percentage point tax increase (from 8 percent to 10 percent) scheduled to go into effect on Oct. 1, indicating that purchases are less likely to plunge afterward, the Japan Times reported. During the previous tax hike in 2014, the economy contracted after consumer spending surged ahead of the increase, and then plummeted once the tax increased.

Japan’s Prime Minister Shinzo Abe announced the implementation of a range of measures ahead of the tax hike to lessen its economic impact. The governments countermeasures include tax breaks on car purchases and homes after the higher tax rate goes into effect, and rebates for those making cashless payments to help prop up spending.

Meanwhile in Taiwan, domestic base oil prices have moved up as local producer Formosa Petrochemical was heard to have raised the domestic list price of its API Group II 70 neutral, 150N and 500N cuts for September shipments on the back of improved demand levels.

Formosa was reported to have lifted its Group II 70N grade by New Taiwan Dollars 0.65 per liter, its 150N by NT$0.35/liter, and its 500N by NT$0.29/liter.

At the same time, it was heard that Formosa, which regularly ships Group II contract cargoes to China, would be reducing the volumes shipped to the neighboring country in the month of September – a reflection of current soft fundamentals there and this year’s increase in local Group II output.

Asian suppliers continue to be faced with the challenge of finding new takers for their products, as Asian markets appeared well-supplied, prices remained exposed to downward pressure, and values in other regions were higher.

There was talk about an increased push to attract Group II buyers based in Europe, where prices are steeper than in the more traditional Asian base stock outlets like India and China.

Large volumes of certain grades such as the Group III cuts produced in South Korea are also shipped regularly to the U.S. Competition between Asian suppliers of Group III base oils and their Middle East counterparts is ongoing in the U.S., but it appears that many accounts have already been established and activity to conquer market share has abated, according to sources.

Similarly, there has been an increased presence of Asian Group III cuts in Europe, but many European buyers have a long-term relationship with particular regional suppliers due to the approvals needed in certain applications, and therefore securing new accounts may be challenging.

Asian spot price assessments were flat this week as negotiations for late September and October shipments were underway.

Ex-tank Singapore Group I prices for the SN150 grade were steady at $720/t-$740/t, while the SN500 was heard at $770/t-$790/t. Bright stock was holding at $840/t-$860/t, all ex-tank Singapore.

The Group II 150 neutral was assessed at $750/t-$770/t, while the 500N was at $760/t-$780/t, ex-tank Singapore.

On an FOB Asia basis, Group I SN150 was heard at $600/t-$620/t, and the SN500 grade was gauged at $560/t-$580/t. Bright stock was steady at $740/t-$760/t, FOB Asia.

Group II 150N was unchanged at $560/t-$580/t FOB Asia, while the 500N and 600N cuts were also stable at $570/t-$590/t, FOB Asia.

In the Group III segment, the 4 centiStoke was holding at $790-$820/t and the 6 cSt at $810/t-$855/t. The 8 cSt grade was also steady at $710/t-$740/t, FOB Asia for fully-approved product.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.