Oil prices extended a week-long rally on Wednesday after Venezuela said it would stop selling crude to Exxon Mobil Corp in the midst of an intensifying legal dispute over a nationalised oil project.
Oil also received a boost from a US government report showing a smaller-than-expected increase in crude stockpiles in the world's top consumer due to a slowdown in imports and an increase in demand from refiners, traders said. US crude futures settled up 49 cents at $93.27 a barrel, extending their gains since last week to about $6. London Brent crude gained 46 cents at $93.32 a barrel.
"The ongoing legal fight between Venezuela and Exxon Mobil has brought the market's attention back to the fragility of the supply side of the oil market," said Kevin Norrish, energy analyst at Barclays Capital.
President Hugo Chavez cut oil sales to Exxon Mobil late on Tuesday after the company won a court decision freezing $12 billion of Venezuela's overseas assets in a fight for compensation for a nationalised oil project.
Top global oil producers have assured the United States they can make up for any major supply disruption should Venezuela cut exports, a US government official told Reuters on Tuesday. Several energy experts have also said the move by Venezuela, while alarming, is unlikely to pose a serious threat to US supply or to Exxon Mobil's operations.
"This has very little impact on actual production. Crude stocks are high. Exxon can get their crude from almost anyone. What is Venezuela going to do?" said Kyle Cooper, Energy Futures Research, IAF Advisors in Houston, Texas.
Crude inventories in the world's top consumer rose 1.1 million barrels last week, the US Energy Information Administration said, less than the 2.7 million barrels expected by analysts. "There are no major surprises, but the crude supply figure looks supportive to me," said Jim Ritterbusch, president of Ritterbusch and Associates.
After surging to a record $100.09 on January 3, oil has traded in a narrow range near $90 a barrel as fears of a US recession weighed on prices. The International Energy Agency cut its world oil demand growth forecast this year due to the economic slowdown in the world's top energy consumer.
The IEA, adviser to 27 industrial countries, forecast in its monthly Oil Market report that global oil demand growth would average 1.67 million barrels per day, down 310,000 bpd from its previous estimate.
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