UPDATE 3-Venezuela cuts foreign oil clients' payment time

(Recasts, adds contract details from trading source)

By Enrique Andres Pretel

CARACAS Jan 8 (Reuters) - Venezuela has slashed the time foreign clients have to pay for its oil, in an unusual move that increases the OPEC nation's control over its resources as its massive state oil company apparently faces a cash crunch.

The company, PDVSA, said on Tuesday its demand for a payment within eight days -- instead of the previous industry norm of 30 days -- was prompted in part by weakness in the U.S. dollar and would give it more liquidity for investment.

Industry officials say PDVSA periodically faces cash crunches despite record crude prices, because the company hands over much of its income to President Hugo Chavez to finance his leftist social programs for his majority poor backers.

"With this measure PDVSA injects greater intensity and speed to reinvestment with the aim of staying competitive in the hydrocarbons market," the company said in a statement.

The company said it could not give further details and it was not immediately clear if the changes would affect all crude purchases including longer-term contracts.

But a source familiar with PDVSA sales said the new conditions only affected spot sales.

The move was at least due in part to cash flow problems at the company but could have the unintended consequence of reducing PDVSA's income, he said.

"The decision hurts the price. Those clients that accept the new conditions can demand a better price because there is an implied financial cost for them in the transaction," he said.

PDVSA, which is the government's main source of income, has borrowed heavily in recent and sometimes made in-kind payments to creditors in crude to avoid spending cash, they say.

INDUSTRY ANGER

The decision angered oil industry players, frustrated by Chavez's sudden rule changes that last year included nationalization decrees seizing billions of dollars worth of foreign oil companies' assets.

"There he goes again, acting out against Western interests," said John Kilduff, senior vice president at MF Global, who added that the change could pressure the dollar.

Venezuela's relative short shipping distance from the U.S. Gulf Coast may reduce the sting for its major clients but will likely be particularly unwelcome to its Asian clients who have to wait up to 40 days for a shipment.

"It definitely makes Venezuelan crude less attractive to more distant buyers," said a crude trader at one oil major.

With producer nations emboldened by world crude prices that hit $100 in recent days, the contract move showed Chavez's leftist government flexing its muscles again.

Last year, he wrested a number of large oil projects from foreign companies. Some, including Chevron Corp (CVX.N) and BP (BP.L) stayed in the South American nation under weaker terms.

This year, Chavez has promised to slow his socialist reforms, after a painful referendum defeat showed voter dissatisfaction with more down-to-earth problems like crime and irregular food supply.

PDVSA's reinvestment programs have been weighed down in recent years by increased demands from the government for cash used in programs to build clinics, schools and roads.

Analysts say output has fallen below the official amount of 3.2 million barrels per day. (Additional reporting by Saul Hudson in Caracas and Robert Campbell in New York; Writing by Frank Jack Daniel; editing by Marguerita Choy)