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.