Crude Oil Trades Higher Despite Saudi Arabian Price Cut to Asia

During the Asian session, November Crude Oil futures gained 36 cents to $45.91 per barrel in electronic trading on the New York Mercantile Exchange. This is coming off Friday’s strong close which saw the contract post an 80 cent gain. Brent crude used to price international oils, advanced 37 cents to $49.16 per barrel in London. On Friday, it rose 41 cents to $48.79.

The weaker U.S. Dollar is helping to support oil prices since it is a dollar-denominated commodity. When the dollar falls in value, crude oil becomes more attractive to foreign buyers.

Crude oil is in focus today after Saudi Arabia said it would cut the price of its light-crude deliveries to Asia. With U.S. production still increasing despite lower oil prices, members of the Organization of the Petroleum Exporting Countries are battling to keep their share of the last growing markets in Asia.

In a list of official prices sent to customers, state-oil company Saudi Aramco cut the price of its light-crude deliveries to Asia by $1.7 a barrel. As a result, it switched to a discount of $1.6 a barrel against the rival Dubai benchmark from a premium of 10 cents a barrel previously. The company also cut its prices for heavy oil by $2 a barrel to the Far East and by 30 cents a barrel to the U.S.

The move comes as Iran, Iraq and other countries in the Middle East made deeper cuts in their official prices than Saudi Arabia last month.

Saudi Arabia has vowed to keep pumping at high levels as it hopes lower oil prices will stimulate Asian demand and hit rival production in the U.S. that is expensive to produce. But while Chinese economic growth is slowing, U.S. production rose by about 680,000 barrels a day in July, according to the U.S. Energy Information Administration.

In other news, Russia said it was prepared to meet other producers to discuss the situation in the global oil market. Also supporting the market was another drop in the number of producing rigs in the U.S.  Rigs targeting oil in the U.S. fell by 26 to 614, adding to the 35 sidelined in the previous four weeks, according to Baker Hughes.