Venezuela softens tone on U.S. oil cutoff threat

By Frank Jack Daniel

CARACAS (Reuters) - Venezuela softened its tone on Tuesday over a threat by President Hugo Chavez to stop oil sales to America, with crude prices coming off a spike after a top official said a supply cut would be undesirable.

The deputy oil minister's pragmatism reinforced analysts' views the anti-U.S. president is likely to keep shipping oil, even as the OPEC nation repeated its conditional threat and vowed to get tough with Exxon Mobil in a dispute that sparked Chavez's anger.

Oil prices fell as fears eased of Venezuelan action and on forecasts for an increase in U.S. crude inventories.

Washington played down Chavez's threat, which he has delivered in different forms for years but never carried out.

Other major oil producers have assured the United States they would make up for any interruption to Venezuelan supplies, a U.S. official who declined to be named said, adding a cutoff would hurt ordinary Venezuelans.

Chavez said he could halt oil exports to the United States over a legal offensive by U.S. giant Exxon, which has won temporary court rulings freezing up to $12 billion (6.1 billion pounds) in Venezuelan assets in a fight over payment for a nationalized heavy crude project.

Curtailing supplies is "feasible" but would hurt both nations' economies, said Bernard Mommer, deputy minister at state-oil company PDVSA and top strategist in Chavez's drive to bring Venezuela's energy resources under government control.

Asked on state television if it was desirable to cut off supplies, Mommer replied, "No. It would cost us money and would cost the other side money too."