By Frank Jack Daniel
CARACAS (Reuters) - Venezuelan President Hugo Chavezstopped oil exports to Exxon Mobil on Tuesday, escalating amulti-billion dollar fight with the U.S. company two days afterthreatening to cut off all supplies to America.
The anti-U.S. president's retaliation for Exxon's legaloffensive, which froze $12 billion (6.13 billion pounds) inVenezuelan assets, pushed oil prices higher in late trading.
State oil company PDVSA said it broke off commercial tiesand halted the supply of crude and petroleum products toAmerica's largest company in a fight over Exxon's demand forcompensation after Chavez seized a crude project last year.
"Faced with the legal-economic harassment started by ExxonMobil against PDVSA and as an act of reciprocity, PDVSA hasdecided to suspend commercial relations," the Venezuelancompany said in a statement.
Venezuela is the No. 4 energy supplier to the UnitedStates, which is its biggest customer.
Washington has played down Chavez's threat, industryanalysts say it is unlikely he will carry it out and even hisdeputy energy minister said Venezuela wanted to avoid a generalcutoff because it would be costly for the OPEC nation.
But after regularly issuing conditional warnings overending exports to what he calls the evil superpower, Tuesday'salbeit limited move was the first time Chavez has taken anyconcrete action over supplies following a threat.
PDVSA said it would not break certain contracts with Exxon,an apparent reference, analysts said, to the jointly ownedChalmette refinery in Louisiana.
Venezuela's other sales to Exxon in November were about90,000 barrels per day, a drop in the bucket for the world'slargest oil company.
"SABER-RATTLING"
Jim Ritterbusch, president of Ritterbusch & Associates oilconsultants, said Chavez's move was "sabre-rattling."
"It is to Venezuela's interest to keep oil prices high andits response to the Exxon Mobil asset freeze orders has donejust that," he said.
With two thirds of its oil exports going to the UnitedStates, industry analysts believe Chavez is unlikely to carryout his supply threat because it would slash revenue he uses tofund the social programs that underpin his popularity.
The Exxon battle pits Chavez, a leading proponent ofresource nationalism who calls capitalism an evil, against oneof the world's largest companies seeking access to increasinglyrestricted oil deposits around the globe.
Chavez, a self-styled socialist revolutionary who clasheswith Washington over everything from oil prices to democracy,says Exxon is a proxy in a U.S. economic war against him..
It was not immediately clear whether PDVSA would stillsupply some crude to Chalmette or what it would do with theexcess crude that would normally go to Exxon Mobil.
Exxon Mobil said it will act to ensure supply to itsclients.
"It is our long-standing practice to take appropriate stepsto meet our customer needs," spokeswoman Margaret Ross said.
Earlier on Tuesday, Exxon said it was interested in holdingsubstantive talks to negotiate fair compensation for seizure ofa project based in one of the world's largest oil deposits.
Exxon, which reported the highest-ever operating profit bya U.S. company last quarter, began extracting oil fromVenezuela in the early 20th century.
In recent days state television has repeated clips of theExxon Valdez oil spill, overlaid with animated scenes of dropsof oil turning into blood.
Exxon produced an average of 4.253 million bpd in thefourth quarter on 2007, far higher than Venezuela's output.
(Additional reporting by Matthew Robinson in New York andMichael Erman in Houston; Writing by Saul Hudson; Editing byDavid Gregorio and Carol Bishopric)