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Venezuela's state-owned oil company PDSVA says it's cutting off supplies to ExxonMobil 

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[XOM  Loading...      ()   ]. Most traders I talk to think it's all talk from President Hugo Chavez while he tries to save face as the legal battle between his country and the oil giant has gone Exxon's favor so far.

PDSVA has said it will continue to honor joint agreements with Exxon which appears to indicate they won't stop exporting the 78,000 bpd of oil that goes to their joint venture with Exxon in Chalmette, Louisiana.

But Venezuela has stopped some shipments to Exxon in the Caribbean. Not a lot, but some. John Wright at Energy News Today Inc. tells me PDVSA ordered its Isla refinery on Curacao to immediately stop the supply of refined products to ExxonMobil, which lifts on average 55,000 barrels of gasoline, 80,000 barrels of jet fuel and 124,000barrels of diesel from Isla per month for distribution in the region.

The big worry is that Venezuela could decide to cut off exports to Citgo refineries here in the U.S., which account for about 30 percent (340,000 bpd) of crude that comes from there to our shores. If Chavez made such a drastic move, the country still has a lot to lose by cutting off supplies to U.S. refineries. As I said in my earlier post, he needs the U.S. more than the U.S. needs him. Venezuela now exports a greater proportion of its implied crude exports to the United States than at any other time since the ’03 strike, contrary to Chavez’s stated intentions of diverting oil exports away from the United States, according to JP Morgan energy analyst Katherine Spector.

And my CNBC colleague Judy Gee makes a good point: "The real challenge would be the task of finding a new customer. The U.S. is Venezuela's top energy consumer, and also the preferred market because of our vast wealth and need for oil--not to mention the low freight cost. Currently, South America has more supply than demand and finding a new customer locally would prove useless.

Venezuela would inevitably head to the other side of the world, toward Europe and Asia, markets with longer transit times and higher transportation costs. On top of that, refiners in these regions are not well-equipped with specialized conversion units (such as cokers) to refine Venezuela's high-sulfur crude into quality transportation fuel. But, of course, U.S. refineries can."

It's a love-hate relationship. But Venezuela still has not recognized that it needs the refining capacity of the U.S. as much as the U.S. needs to buy Venezuelan oil. We all know crude oil is not worth anything unless you can sell it or refine it.

Questions?  Comments?  energysource@cnbc.com

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