Exxon Mobil to Lead $1.3B Alaska Project

ANCHORAGE, Alaska -

Exxon Mobil Corp. said late Tuesday it will lead a $1.3 billion project to drill for hydrocarbons in the Point Thomson field on the Alaska North Slope.

The Irving, Texas-based company, the largest U.S. oil producer, said drilling will begin during the 2008-2009 winter season, with initial production slated for the end of 2014. Exxon Mobil (nyse: XOM - news - people ) said it has submitted its plan to the Alaska Department of Natural Resources.

Other Point Thomson Unit (nyse: UNT - news - people ) owners include BP (nyse: BP - news - people ) Exploration (Alaska) Inc., Chevron (nyse: CVX - news - people ) USA Inc. and ConocoPhillips (nyse: COP - news - people ) Alaska Inc.

Exxon Mobil said about 200 million cubic feet of natural gas per day would be produced initially. About 10,000 barrels per day of liquid condensate will then be separated from the gas and shipped through new and existing oil pipelines, while the remainder will be pumped back into the reservoir to maintain pressure.

Exxon Mobil currently produces about 140,000 barrels of oil per day in Alaska.

Exxon Mobil shares fell 71 cents to $86.30 in premarket trading after closing at $87.01 on Tuesday

Oil Jumps on Falling Dollar, Refinery

NEW YORK -

Oil futures shot higher Tuesday, nearing $99 at times as investors bet that crude prices will keep rising despite evidence of plentiful supplies and falling demand. At the pump, gas prices rose further above $3 a gallon.

There was no single driver behind oil's sharp price jump; investors seized on an explosion at a 67,000 barrel per day refinery in Texas, the falling dollar, the possibility that OPEC may cut production next month, and continuing tensions between the U.S. and Venezuela.

Gasoline and heating oil prices appeared to be leading the advance, rising faster in percentage terms than oil due to the explosion Monday at Alon USA's Big Spring, Texas, refinery, which could be shuttered for weeks.

"The refinery fire in Texas is making people a little concerned," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Amherst, Mass.

Light, sweet crude for March delivery rose $2.61 to $98.11 a barrel on the New York Mercantile Exchange after rising as much as $3.28 a barrel earlier. March gasoline jumped 9.14 cents to $2.5852 a gallon, and March heating oil rose 7.68 cents to $2.7237 a gallon.

The dollar fell Tuesday, giving investors another reason to buy oil. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

For the moment, investors appear to have put aside concerns about the economy that have sent oil prices down into the mid-$80 range twice since crude peaked above $100 last month. Traders are instead focused on the Organization of Petroleum Exporting Countries, which will meet early next month to map out production plans, and Venezuela, where President Hugo Chavez made conflicting statements this weekend about the country's legal dispute with Exxon Mobil Corp.

OPEC could move to cut production in the second quarter, typically a period of low demand, though many analysts feel that's unlikely. In Venezuela, Chavez said he was not serious about an earlier threat to cut oil sales to the U.S., but also threatened to sue Exxon Mobil. The world's largest oil company is fighting Venezuela's nationalization of an oil project, and recently convinved several courts to freeze $12 billion in Venezuelan oil assets.

None of the news is enough to justify a nearly $3 a barrel jump in the price of crude, said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm. Echoing other analysts, Cordier argued that the oil market is in the process of "decoupling" from oil's supply and demand fundamentals. He said investors drawn by the falling dollar and momentum are pushing oil prices sharply higher despite reports last week from the Energy Department, OPEC and the International Energy Agency which all cut oil demand growth predictions for this year.

"Everyone concurs that we've got smaller demand coming in the U.S.," Cordier said.

Retail gas prices, meanwhile, jumped 1.8 cents to a national average price of $3.032 a gallon Tuesday, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, are following oil prices higher. The Energy Department expects gas prices to peak near $3.40 a gallon this spring.

Other energy futures also rose Tuesday. March natural gas jumped 28 cents to $8.94 per 1,000 cubic feet. Analysts said prices were supported by forecasts for cooler weather, but that futures were also following oil prices higher.

Oil Is Steady After Talk of OPEC Cuts

BANGKOK, Thailand -

Oil price were steady Monday in Asia, rising slightly after further hints that OPEC may cut production if global supplies continue to rise amid forecasts for slower growth in demand.

The Organization of Petroleum Exporting Countries has trimmed its demand forecasts for this year by 100,000 barrels a day, but it has also hinted it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.

Several reports in recent days, though, have suggested that global economic conditions may not be deteriorating as quickly as feared. The U.S. Federal Reserve said Friday that industrial production in the world's largest economy rose last month in line with expectations. On the other hand, the Energy Department, the International Energy (otcbb: IENI.OB - news - people ) Agency and now OPEC have all cut demand forecasts.

Light, sweet crude for March delivery rose 23 cents to $95.73 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore.

The Nymex crude contract rose 4 cents Friday to settle at $95.50 a barrel after alternating frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.

On Sunday, Venezuelan President Hugo Chavez soothed American motorists, saying that Venezuela is not preparing to cut off oil shipments to the United States.

The socialist leader rattled oil markets when he threatened a week ago to halt shipments to the United States in retaliation for Exxon Mobil Corp. (nyse: XOM - news - people )'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets.

"We don't have plans to stop sending oil to the United States," Chavez said Sunday during a visit to heavy-oil projects in Venezuela's petroleum-rich Orinoco River basin that were nationalized last year.

But he added that Venezuela could cut off supplies to the United States if Washington "attacks Venezuela or tries to harm us." Chavez has repeatedly warned against a possible U.S. invasion to seize control of Venezuela's immense oil reserves. U.S. officials have denied any such plan exists.

The United States relies on Venezuela for about 10 percent of its oil imports.

Chavez's administration is locked in a legal battle with Irving, Texas-based Exxon Mobil over compensation for the nationalization of one of four heavy-oil projects in the Orinoco River basin.

Exxon Mobil, the world's largest publicly traded oil company, is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff if it wins a decision by an international arbitration panel.

Last month, a British court injunction ordered the temporary freezing of up to $12 billion in assets of state-run Petroleos de Venezuela SA, or PDVSA.

Brent crude for April delivery rose 26 cents to $94.89 a barrel on the ICE Futures exchange in London.

Heating oil futures rose 0.81 cent to $2.655 a gallon while gasoline prices gained 0.59 cent to $2.4997 a gallon. Natural gas futures rose 15.1 cents to $8.811 per 1,000 cubic feet.

Chavez: No Plans to Cut US Oil Exports

CARACAS, Venezuela -

President Hugo Chavez sent a soothing message to American motorists on Sunday, saying that Venezuela is not preparing to cut off oil shipments to the United States.

The socialist leader rattled oil markets last Sunday when he threatened to halt shipments to the United States in retaliation for Exxon Mobil Corp. (nyse: XOM - news - people )'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets.

"We don't have plans to stop sending oil to the United States," said the socialist leader during a visit to heavy-oil projects in Venezuela's petroleum-rich Orinoco River basin that were nationalized last year.

But if the United States "attacks Venezuela or tries to harm us, we will have to make the decision not to send a single drop of our oil to the United States," he added.

U.S. officials have denied planning to attack Venezuela.

The administration of Chavez - a close ally of Cuban leader Fidel Castro - is locked in a legal battle with Irving, Texas-based company over compensation for nationalization of one of four heavy-oil projects in the Orinoco River basin.

Exxon Mobil - the world's largest publicly traded oil company - is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff in the event it wins a decision by an international arbitration panel.

The United States relies on Venezuela for about 10 percent of its oil imports.

Energy Sector Roundup: Crude Inches Up

NEW YORK -

Following is a summary of top stories in the energy sector Friday afternoon.

Oil Hangs On to a Gain

Oil futures settled a little higher, giving up larger earlier gains as traders sold to book profits from crude's recent 10 percent price rally.

Light, sweet crude for March delivery added 4 cents to settle at $95.50 on the New York Mercantile Exchange but alternated frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.

March gasoline futures rose 1.77 cents to settle at $2.4938 a gallon on the Nymex, while March heating oil fell 1.97 cents to $2.6469 a gallon. March natural gas lost 11.2 cents to $8.66 per 1,000 cubic feet.

OPEC Revises Outlook for Global Oil Demand

In its monthly oil market report, the Organization of Petroleum Exporting Countries trimmed its 2008 outlook for global oil demand growth and said more cuts in its forecast could lie ahead.

OPEC said slowing economic growth, softer demand for petroleum products and rising crude and gasoline inventories in the U.S. and Europe "warrant close monitoring in the months ahead to ensure a timely response to changing conditions."

OPEC said current production from its member nations is about 32 million barrels a day, which could pad global oil inventories in coming quarters.

The report noted U.S. oil and gasoline stocks are now already above the five-year average following a steady decline in December.

OPEC cut its outlook for 2008 global oil demand growth by 100,000 barrels a day to 1.2 million barrels a day - still an increase of 1.4 percent over last year.

Lehman Sees Refiners Entering a "Dark Age"

Refiners' shares tumbled after a Lehman Brothers (nyse: LEH - news - people ) analyst cut his rating on the sector, suggesting the industry has entered a "dark age" of shrinking margins that could last through the end of the decade.

Analyst Paul Cheng cut his rating on the sector to "Negative" from "Neutral."

"We forecast the sector will resume its downward spiral by early summer and will exit the year below its recent lows," he wrote in a client note.

Cheng noted that U.S. refining margins have dropped by 74 percent since last May. But rather than signal a seasonal pullback, the drop-off seems to herald "a new multiyear down cycle," the analyst said.

The problem, as Cheng sees it, is that demand will not keep up with growing supplies of refined products such as gasoline. "Unless the global demand growth rate exceeds 2 percent per annum for the next several years, we expect supply will outpace consumption growth, which in turn should result in a declining margin environment."

In afternoon trading, shares of Valero Energy Corp. (nyse: VLO - news - people ), the largest U.S. refiner, sank $1.57, or 2.7 percent, to $57.19. Tesoro Corp. (nyse: TSO - news - people ) dropped $1.33, or 3.5 percent, to $36.41, and Sunoco (nyse: SUN - news - people ) fell $1.09 to $60.52.

Transocean (nyse: RIG - news - people ) Ultradeep Rig Hired for Indonesia Project

Transocean Inc. received a 689-day contract for its ultra-deepwater drillship GSF Explorer from a group headed by a Marathon Oil Corp. subsidiary. It will drill exploration wells off Indonesia and should bring Transocean revenue of about $351 million under the deal.

The GSF Explorer is one of 18 ultra-deepwater floater rigs in the Transocean fleet. It can operate in up to 7,800 feet of water.

More Rigs Operating in U.S. and Canada

The number of rigs actively exploring for oil and natural gas in the U.S. this week increased by 18 from the previous week to 1,773. That is 27 more operating than a year ago.

Of the rigs running nationwide, 1,428 explore for natural gas and 339 for oil, according to Baker Hughes Inc. (nyse: BHI - news - people ) Six are listed as "miscellaneous." There are 55 offshore rigs operating.

Among the top petroleum-producing states, Oklahoma added five rigs, Colorado and Louisiana four, Texas three, Alaska two and Wyoming picked up one. New Mexico lost two rigs and California one.

In Canada 632 rigs were in operation, up 34 from the week before.

Eni Gets Compensation Deal with Venezuela

Italian energy company Eni SpA reached a deal with Venezuela for compensation in the 2006 seizure of its Dacion oil field, according to Italian news agencies.

"We obtained compensation at book value," Chief Executive Paolo Scaroni told a news conference.

The Dacion field has an estimated value of $839 million, but Scaroni did not say how much Eni received from the Chavez government.

Exxon Mobil (nyse: XOM - news - people ) challenged state-run oil company PdVSA over compensation for one of its four heavy oil projects in the Orinoco River basin, obtaining court orders that froze up to $12 billion of PdVSA assets. The Venezuelan company retaliated by cutting off crude shipments to Exxon Mobil, a move most analysts think will have little impact on Exxon Mobil.

Exxon Mobil Reserves Replacement Rate Over 100 Percent

Exxon Mobil Corp. says it added the equivalent of 1.6 billion barrels of oil to its known reserves last year, more than replacing the amount it produced.

The company said the added reserves, which drew on drilling programs in North America, the Middle East, Europe and West Africa, totaled 101 percent of its 2007 output.

The total would have included half a billion more barrels were it not for abandoned operations in Venezuela and other asset sales. Exxon Mobil controlled the equivalent of 72 billion barrels of oil at the end of the year.

Eni-Venezuela Deal Reported

ROME -

Italian energy company Eni SpA on Friday reached a deal with Venezuela for compensation for the seizure of its Dacion oil field, Italian news agencies reported, quoting Eni's CEO.

"A few minutes ago we closed a deal with the Venezuelan government on the Dacion oil field, for which we obtained compensation at book value," Eni chief executive Paolo Scaroni was quoted as saying at a news conference near Milan. Dacion, worth an estimated $839 million, was seized in April 2006 by the government of Venezuelan President Hugo Chavez.

Scaroni did not cite the book value.

The ANSA and Apcom news agencies also quoted Scaroni as saying that negotiations aimed at Eni's entering into Venezuela's Orinoco Basin have begun. Last year, Exxon Mobil (nyse: XOM - news - people ) walked away from its heavy oil upgrading operations in the Orinoco River basin after Chavez's government changed the terms of the contract.

Exxon Mobil Corp. is challenging Venezuela's state-run oil company over compensation for the nationalization of one of four heavy oil projects in the Orinoco basin, one of the world's richest oil deposits.

Earlier in the day, Eni, which is 30 percent state-controlled, said preliminary fourth-quarter net profit almost doubled due to its key upstream division and because of stronger crude prices and higher volumes sold following its acquisition spree.

The company said that net profit in the last quarter of 2007 climbed to euro3 billion (nearly US$4.5 billion) compared with euro1.52 billion in the same period a year earlier.

Full-year net profit was up by 8.6 percent, to some euro10 billion (US$15 billion) from euro9.22 billion for 2006.

Eni also said that oil and natural gas production was up by 1.1 percent in the fourth quarter of 2007, but down by 1.9 percent over the entire year.

Eni's U.S.-traded shares were up 84 cents, or 1.3 percent, to $66.05 in late trading Friday on the New York Stock Exchange.

Oil Swings Widely on Conflicting Data

NEW YORK -

Oil futures inched higher Friday, giving up much larger earlier gains, as traders sold to book profits from crude's recent 10 percent price rally.

Volatility was the day's watchword, as prices alternated on mixed news from OPEC and competing views about the economy and demand for oil.

The Organization of Petroleum Exporting Countries trimmed its demand forecasts for this year by 100,000 barrels a day but hinted that it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.

"It's always on the mind of traders what OPEC is going to do," said Addison Armstrong, director of exchange traded markets at TFS Energy Futures LLC in Stamford, Conn.

Earlier in the week, prices rose on Venezuelan President Hugo Chavez's threat to cut off oil shipments to the United States in retaliation for Exxon Mobil Corp. (nyse: XOM - news - people )'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets. Exxon has taken Venezuela to court over last year's nationalization of an oil field.

Several reports in recent days have suggested that economic conditions may not be deteriorating as quickly as feared. On Friday, the Federal Reserve said industrial production rose last month in line with analyst expectations. On the other hand, the Energy Department, the International Energy (otcbb: IENI.OB - news - people ) Agency and now OPEC have all cut demand growth forecasts for this year. At the same time, domestic oil supplies have risen for several weeks.

"I think we're just finally coming back down to earth," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Light, sweet crude for March delivery rose 4 cents to settle at $95.50 on the New York Mercantile Exchange after alternating frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.

In recent days, many analysts have questioned oil's price strength in the face of falling demand.

"It makes no sense," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., who suggested speculators may be behind the recent rise. "I think it's financial and it's speculative."

Markets that rise quickly on speculative money often fall even faster, analysts say.

At the pump, meanwhile, gas prices rose 0.5 cent overnight to a national average of $2.984 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, have drifted higher in recent days, following oil's recent rally.

Other energy futures were mixed Friday. March gasoline futures rose 1.77 cents to settle at $2.4938 a gallon on the Nymex, while March heating oil fell 1.97 cents to $2.6469 a gallon. March natural gas fell 11.2 cents to $8.66 per 1,000 cubic feet.

Oil Off on Profit-Taking, Demand View

NEW YORK -

Oil futures fell Friday as traders sold to book profits from crude's recent 10 percent price rally and fretted about data suggesting demand for oil is falling.

OPEC offered the oil market mixed news, trimming its demand forecasts for this year by 100,000 barrels a day but hinting that it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.

"It's always on the mind of traders what OPEC is going to do," said Addison Armstrong, director of exchange traded markets at TFS Energy Futures LLC in Stamford, Conn.

Earlier in the week, prices rose on Venezuelan President Hugo Chavez's threat to cut off oil shipments to the United States in retaliation for Exxon Mobil Corp. (nyse: XOM - news - people )'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets. Exxon has taken Venezuela to court over last year's nationalization of an oil field.

Several reports in recent days have suggested that economic conditions may not be deteriorating as quickly as feared. On Friday, the Federal Reserve said industrial production rose last month in line with analyst expectations. But the Energy Department, the International Energy (otcbb: IENI.OB - news - people ) Agency and now the Organization of Petroleum Exporting Countries have all cut demand growth forecasts for this year. At the same time, domestic oil supplies have risen for several weeks.

Light, sweet crude for March delivery fell 69 cents to $94.77 on the New York Mercantile Exchange after rising by more than $1 earlier. Through Thursday, oil prices rose more than $8 in little more than a week.

In recent days, many analysts have questioned oil's price strength in the face of falling demand.

"It makes no sense," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., who suggested speculators may be behind the recent rise. "I think it's financial and it's speculative."

Markets that rise quickly on speculative money often fall even faster, analysts say.

At the pump, meanwhile, gas prices rose 0.5 cent overnight to a national average of $2.984 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, have drifted higher in recent days, following oil's recent rally.

Other energy futures also fell Friday. March gasoline futures dipped 0.58 cent to $2.4703 a gallon on the Nymex, and March heating oil fell 3.48 cents to $2.6318 a gallon. March natural gas fell 10.7 cents to $8.665 per 1,000 cubic feet.

In London, April Brent crude futures fell $1.03 to $94.13 a barrel on the ICE Futures exchange.

INTERVIEW - Mankind Can't Afford More Oil Drilling - Ex-BP Exec

LONDON - Known oil, gas and coal reserves may already contain a quarter more carbon than mankind can emit and still avoid dangerous climate change, putting the value of new oil exploration in doubt, said a former oil major executive.

The oil industry may be wasting $50 billion annually searching for new fields, said Jan-Peter Onstwedder, formerly BP's most senior risk manager. He left BP in December.

He calculated potential carbon emissions from proven oil, gas and coal reserves at around 700 billion tonnes, compared with about 500 billion tonnes which can be emitted this century and keep temperature increases within less dangerous bounds.

"It prompts the question where does more exploration fit, do we already have all the reserves we possibly need?" he said.

"I don't know whether they thought their strategy through."

Onstwedder spent six years as global head of risk covering supply and trade in oil, gas and other commodities, and which account for most of BP's sales and purchases.

He spent last year on sabbatical coordinating 10 investment banks in a "London Accord" climate change research project meant to pin-point cheapest cuts in carbon emissions, published in December.

Record high oil prices have made it economic to extract oil from formerly unattractive reserves such as oil-rich sands in Canada, and Onstwedder's calculations raise the question whether finding new such reserves makes sense.

Still unexploited Canadian oil sands comprise 12 percent of the world's proven oil reserves, BP data show. Proven fossil fuel reserves are those already known and which are economic to exploit. Another class of "probable" reserves geologists know exist but extraction costs are unsure.

The United Nations' Intergovernmental Panel on Climate Change (IPCC) reported last year that keeping long-term warming to 2.0-2.4 degrees centigrade above pre-industrial levels meant mankind had to at least halve global carbon emissions by 2050.

The European Union warns that 2 degrees warming is a threshold for dangerous climate change.

Halving emissions meant limiting carbon emissions to about 500 billion tonnes of carbon this century, Onstwedder estimated.

LOCKED IN

Onstwedder's estimate was in line with academic studies.

Potsdam Institute climate scientist Malte Meinshausen calculated that mankind should emit no more than 400 billion tonnes of carbon this century to have at least a 50:50 chance of staying within 2 degrees.

A less ambitious goal of limiting warming to about 3 degrees would allow more than 800 billion tonnes carbon emissions this century Meinshausen calculated in a recent UN report.

After applying US government conversion factors, BP's annual energy review shows "locked in" carbon emissions of about 152 billion tonnes in proven oil reserves, 96 billion tonnes in natural gas fields and 455 billion tonnes in coal reserves -- or 703 billion tonnes in total.

Coal power plants could produce less carbon by pipeing emissions underground using carbon capture and storage (CCS) technology, but that is untried and so expensive that so far one pilot project after another has collapsed.

The US Energy Department two weeks ago shelved plans to support the "FutureGen" pilot plant because of cost overruns.

"The only reason you'd have to explore for more (oil) is if CCS works," said Onstwedder. "As an investor I'd ask how comfortable are you that CCS will work. I haven't seen oil companies answer that directly."

Judge: Exxon Mobil Likely to Win Dispute

NEW YORK -

A federal judge in Manhattan on Wednesday confirmed the freezing of $300 million in cash held by Venezuela's state-run oil company, finding it probable that Exxon Mobil Corp. will win its legal battle against the company.

Exxon Mobil is challenging Petroleos de Venezuela SA, or PDVSA, over compensation for the nationalization of one of four heavy oil projects in the Orinoco River basin, one of the world's richest oil deposits.

Irving, Texas-based Exxon Mobil, the world's largest publicly traded oil company, is seeking to freeze billions in Venezuelan assets in the United States and Europe to guarantee a payoff in the event it wins a decision by an international arbitration panel.

U.S. District Judge Deborah A. Batts on Wednesday confirmed the "order of attachment" on the $300 million in Venezuelan cash after listening to arguments from lawyers for both oil companies.

A British court issued an injunction last month temporarily freezing up to $12 billion of PDVSA's assets.

Venezuelan President Hugo Chavez rattled international oil markets this week by threatening to cut off all oil supplies to the United States in response Exxon Mobil's legal challenges. On Tuesday, PDVSA said it would stop selling oil to Exxon Mobil, although it was not clear how much crude that would affect.

Venezuelan Oil Minister Rafael Ramirez, who also heads PDVSA, on Wednesday vowed to mount "a defense of the nation's interests" in the battle with Exxon Mobil.

U.S. State Department spokesman Sean McCormack, meanwhile, said the United States supports the U.S. oil company's efforts to seize assets to get a "just and fair compensation."

Venezuela did not immediately respond to the judge's decision in New York.

But Foreign Minister Nicolas Maduro said in Caracas that the U.S. State Department's expression of support for the company "makes things clearer: behind Exxon Mobil's maneuver is the United States government."

"It's not a commercial dispute. It's a political dispute between a government exercising its sovereignty ... and the government of the United States," Maduro told reporters.

The $12 billion British court order was mentioned frequently during Wednesday's arguments.

PDVSA lawyer Joseph Pizzurro said the $12 billion demand by Exxon Mobil was so inflated that PDVSA's representatives told the company it was ridiculous.

"There's such a huge dispute between what Exxon Mobil says it is owed and a reasonable valuation," Pizzurro said.

He said the U.S. oil company originally demanded $5 billion in private negotiations with PDVSA but asked for $12 billion in court.

He said the dispute should be settled in arbitration proceedings.

Steven K. Davidson, a lawyer for Exxon Mobil, told the judge it was inappropriate to reveal the $5 billion that was mentioned during negotiations.

Davidson told Batts it was necessary to freeze the assets because PDVSA was "likely to dissipate its assets, which is one of the reasons for the award in London."

Pizzurro said PDVSA has $80 billion to $90 billion assets worldwide that would be available for any award in a U.S. court.

Oil Rebounds After Falling Below $93

LONDON -

Oil prices rebounded slightly Wednesday after earlier falling below $93.

Light, sweet crude for March delivery rose 18 cents to $92.96 a barrel on the New York Mercantile Exchange by early afternoon in Europe. The contract fell 81 cents to settle at $92.78 a barrel Tuesday.

Oil had fallen as traders overlooked Venezuela's halt of crude sales to Exxon Mobil and instead focused on forecasts for rising U.S. supplies and falling global demand.

The state-run Petroleos de Venezuela SA, or PDVSA, said Tuesday it had halted crude sales to Exxon Mobil Corp., the world's biggest oil company, in response to its court bid to freeze billions of dollars in Venezuelan assets.

Exxon Mobil is challenging the nationalization of its Venezuelan oil ventures in a dispute that has seen President Hugo Chavez threaten to cut off all supply to the United States.

Venezuela is currently the United States' fourth largest oil supplier.

Analysts said the impact of PDVSA's move on the crude market is primarily psychological and unlikely to significantly reduce supplies.

Energy Information Administration data say that Exxon Mobil imported 2.7 million barrels of crude from Venezuela in November, excluding supplies for a refinery at Chalmette, Louisiana, a joint venture in which PDVSA and Exxon Mobil are equal partners.

The Chalmette refinery imported about 2.3 million barrels from Venezuela in November, according to the EIA. So far it is not clear how crude supplied to the facility will be affected by the cutoff in sales to Exxon Mobil.

"Most market participants, including myself, don't think that Hugo Chavez will actually go through with his threat of halting crude sales to the U.S.," Victor Shum, an analyst with Purvin & Gertz in Singapore. "The amount they sell to the U.S. is about half of what Venezuela produces in total, and at today's high prices, that represents a lot of revenue."

Meanwhile, the executive director of the International Energy Agency, Nobuo Tanaka, said at an energy conference in Houston, Texas, on Tuesday that the organization will cut its monthly oil demand forecast for the year by 200,000 barrels a day. The revision came amid concern about a slowdown in the U.S. economy that could reduce demand.

Tanaka also said the IEA is monitoring the situation with Venezuela and Exxon Mobil, but is not classifying it as a major supply disruption at this point.

Investors were also eyeing the release of U.S. petroleum supply data later in the day. In its weekly inventory report, the Energy Information Administration was expected to report that crude inventories grew 2.7 million barrels last week, according to the average estimate of analysts surveyed by Dow Jones Newswires.

Gasoline stocks likely rose 1.9 million barrels, while distillate stocks, which include heating oil and diesel fuel, were expected to fall 1.2 million barrels.

Heating oil futures rose 0.143 cent to $2.6054 a gallon (3.8 liters) while gasoline prices were little changed at $2.3674 a gallon.

Natural gas futures dropped 6.6 cents to $8.370 per 1,000 cubic feet.

Brent crude rose 40 cents to $93.26 a barrel on the ICE Futures exchange in London.

Chavez Threatens to Halt Oil Sales to US

CARACAS, Venezuela -

President Hugo Chavez on Sunday threatened to cut off oil sales to the United States in an "economic war" if Exxon Mobil Corp. wins court judgments to seize billions of dollars in Venezuelan assets.

Exxon Mobil (nyse: XOM - news - people ) has gone after the assets of state oil company Petroleos de Venezuela SA in U.S., British and Dutch courts as it challenges the nationalization of a multibillion dollar oil project by Chavez's government.

A British court has issued an injunction "freezing" as much as $12 billion in assets.

"If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said during his weekly radio and television program, "Hello, President." "Do you know how? We aren't going to send oil to the United States. Take note, Mr. Bush, Mr. Danger."

Chavez has repeatedly threatened to cut off oil shipments to the United States, which is Venezuela's No. 1 client, if Washington tries to oust him. Chavez's warnings on Sunday appeared to extend that threat to attempts by oil companies to challenge his government's nationalization drive through lawsuits.

"I speak to the U.S. empire, because that's the master: continue and you will see that we won't sent one drop of oil to the empire of the United States," Chavez said Sunday.

"The outlaws of Exxon Mobil will never again rob us," Chavez said, accusing the Irving, Texas-based oil company of acting in concert with Washington.

Exxon Mobil spokeswoman Margaret Ross said the company had no comment. A U.S. Embassy spokeswoman in Caracas did not return a call.

Venezuela accounted for about 12 percent of U.S. crude oil imports in November, the latest figures available from the U.S. Energy (nasdaq: USEG - news - people ) Department. The 1.23 million barrels a day from Venezuela makes that country the U.S.'s fourth-biggest oil importer behind Canada, Saudi Arabia and Mexico.

Venezuelan Oil Minister Rafael Ramirez has argued that court orders won by Exxon Mobil have "no effect" on the state oil company PDVSA and are merely "transitory measures" while Venezuela presents its case in courts in New York and London.

Exxon Mobil is also taking its claims to international arbitration, disputing the terms it was granted under Chavez's nationalization last year of four heavy oil projects in the Orinoco River basin, one of the world's richest oil deposits.

Other major oil companies including U.S.-based Chevron (nyse: CVX - news - people ) Corp., France's Total, Britain's BP (nyse: BP - news - people ) PLC, and Norway's StatoilHydro ASA have negotiated deals with Venezuela to continue on as minority partners in the Orinoco oil project.

ConocoPhillips (nyse: COP - news - people ) and Exxon Mobil, however, balked at the tougher terms and have been in compensation talks with PDVSA.