Oil falls below $93 after spike on Venezuela threat

Oil fell more than a dollar to below $93 a barrel on Tuesday as investors weighed the prospects for growing stocks of crude in the United States, the world’s largest oil consumer.

A U.S. government report due on Wednesday is expected to show crude inventories rose by 2.3 million barrels last week.. Venezuela’s threat to stop oil sales to the U.S., which drove oil higher on Monday, limited the decline.

“Despite the recent surge, we think the markets are probably close to peaking in the short term,” MF Global said in a report.

U.S. crude dropped $1.21 to $92.38 a barrel by 1242 GMT. London Brent crude lost $1.16 to $92.37.

Oil rallied almost 2 percent on Monday in reaction to the threat from Venezuelan President Hugo Chavez.

Venezuela is the fourth-biggest supplier of crude to the United States, 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.

Chavez has frequently issued conditional threats to stop shipments to the United States 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 U.S. 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 U.S. have been on the rise.”

While stocks of U.S. crude were plentiful, distillate stocks — including heating oil and diesel fuel — were expected to show a decline of 1.4 million barrels over the past week. (Reuters)