Chavez monkey wanker 298.
(photo credit: AP)
Venezuelan President Hugo Chavez's latest threat to cut off oil sales to the US produces tantalizing headlines and rattles some oil traders' nerves.
But analysts say it presents no long-term danger to global oil supplies or prices, and makes no economic or political sense for his own country.
Chavez's threat was in retaliation to Exxon Mobil Corp.'s efforts in US and British courts to freeze billions of dollars of assets belonging to Venezuela's state oil company to resolve an oil-production contract dispute.
"If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said Sunday. "Do you know how? We aren't going to send oil to the United States."
His comments helped stir anxiety on oil markets on Monday, sending crude futures prices up by nearly $2 a barrel. (Violence in Nigeria, refinery outages and colder weather in the US also propelled prices higher.)
If Chavez actually cuts off supplies the US, the impact would be mostly symbolic, said oil analyst Peter Beutel of Cameron Hanover in New Canaan, Conn. Any short-term supply disruption would dissipate as other nations make arrangements to take the Venezuelan crude and the US makes up its shortfall by purchasing additional barrels from the Middle East, Africa and other regions.
"It makes no sense for Mr. Chavez to follow through on his threats" because the US refining industry's plants - some of which are owned by Venezuela - are customized to handle much of Venezuela's high-sulfur crude oil, said Tom Kloza, chief oil analyst at the Oil Price Information Service in Wall, New Jersey. If Venezuela's crude was low in sulfur content - making it more valuable on the global market - he might have a better hand to play, Kloza said.
Indeed, the US remains the No. 1 buyer of Venezuelan oil, purchasing more than 41 million barrels in November, accounting for roughly 10 percent of all crude-oil imports that month, according to the most recent Energy Department data available.
With oil prices hovering above $90 a barrel, Chavez relies largely on US oil money to stimulate his economy and bankroll social programs that have traditionally boosted his popularity. Nevertheless, Chavez in December lost a vote on constitutional changes that would have let him run for re-election indefinitely.
"It would be the worst time politically for Chavez to cut oil shipments to the US," said Patrick Esteruelas, Latin America analyst at the Eurasia Group in New York.
This isn't the first time Chavez has tried to use the oil weapon. He has repeatedly threatened to cut off shipments to the US if Washington tries to oust him, but many analysts have dismissed that scenario as highly unlikely.
Chavez, meanwhile, has been vague about precisely what actions by the US government could constitute an attack against his government worthy of halting oil shipments.
Exxon Mobil has gone after the assets of Petroleos de Venezuela SA in US and European courts as it challenges the nationalization by Chavez's government of four heavy oil projects in the Orinoco River basin, one of the world's richest oil deposits.
Other oil companies including Chevron Corp., France's Total, Britain's BP PLC, and Norway's StatoilHydro ASA have negotiated deals with Venezuela to continue as minority partners in the project, but ConocoPhillips and Exxon Mobil balked at the tougher terms and have been in compensation talks with Petroleos.
It still remains unclear how much Venezuela stands to lose economically from Exxon Mobil's lawsuits in courts in New York and London.
Although a British court last month issued an injunction "freezing" as much as $12 billion (â‚¬8.3 billion) in Venezuelan assets, initial reaction from Venezuela's top oil official suggested that Chavez's government does not expect to face much harm.
Oil Minister Rafael Ramirez said last week that the state oil company does not have "any assets in that jurisdiction that even come close to those sums."
Light, sweet crude for March delivery rose $1.82 to settle at $93.59 a barrel on the New York Mercantile Exchange Monday after earlier hitting a one-month high of $94.72. A key factor, analysts said, was that unidentified gunmen in Nigeria - a major producer of light, sweet crude - attacked a naval vessel that was escorting petroleum industry boats, killing one sailor and injuring another. Militant attacks have cut the African nation's oil output by nearly a quarter in the past two years, helping send oil prices to all-time highs.