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Wed 13 Feb 2008 02:56 AM

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Oil steadies near $94 after Venezuela threat

Decline reversed as energy minister repeats Chavez threat to stop exports to the US.

Oil steadied near $94 a barrel on Tuesday, reversing an earlier decline, as Venezuela repeated its threat to stop exports to the US, the world's top consumer.

Venezuela's energy minister, Rafael Ramirez, reiterated the threat made by President Hugo Chavez on Sunday in remarks published by a newspaper on Tuesday. Oil also got a lift from rising equities, dealers said.

"The stock market rallied and that was on top of the Venezuela threats," said Phil Flynn, analyst at Alaron Trading in Chicago.

US crude rose 10 cents to $93.69 a barrel by 1554 GMT. London Brent crude gained 19 cents to $93.72.

The threat prompted investors to look again at the supply side of the market rather than the demand outlook. Oil has fallen from a record high of $100.09 hit in January, partly on concern about the weakening US economy.

Venezuela is the fourth-biggest supplier of crude to the US, and energy analysts have said any interruption to shipments could tighten inventories and push prices higher.

Chavez made the threat on Sunday after Exxon Mobil won a court decision freezing $12 billion of Venezuela's overseas assets, stepping up its push for compensation for the nationalisation of an oil project.

The Venezuelan leader has frequently issued conditional threats to stop shipments to the US amid clashes with the White House, but has never followed through with a halt.

"While a disruption in short-haul Venezuelan supplies would be a blow to the US economy, it would arguably be much more devastating to Venezuela itself," said Antoine Halff of Newedge Group.

"Indeed, despite falling Venezuelan crude output, recent monthly data suggest its exports to the US have been on the rise."

Oil fell earlier on Tuesaday as traders focused on the prospects for higher crude stocks in the US.

A US government report due on Wednesday is expected to show crude inventories rose by 2.3 million barrels last week. (Reuters)

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