Senator warns Venezuela on cutting oil sales

WASHINGTON (Reuters) - The top Republican on the Senate Foreign Relations Committee on Wednesday called on the Venezuelan government to allow that country's state oil company to resolve its legal dispute with U.S. oil giant Exxon Mobil without disrupting the oil markets.

Venezuelan President Hugo Chavez on Tuesday stopped oil sales to Exxon Mobil in retaliation for the company getting a court to freeze some $12 billion in assets belonging to Petroleos de Venezuela (PDVSA) as part of Exxon's efforts to get adequate payment from Venezuela for nationalizing an oil project.

Senator Richard Lugar said Venezuela should use the legal framework, not the oil markets, that Exxon Mobil and PDVSA have chosen to resolve their differences.

"I encourage them to resolve this dispute without further disruption to global oil markets. Stability in oil supplies being traded freely in the global marketplace is vital to the interests of both importing countries and exporting countries," Lugar said.

The senator warned that Venezuela had more to lose by cutting off its oil sales than Exxon Mobil did by no longer have access to certain oil supplies.

"The consequences of Venezuela no longer being seen as a reliable trading partner could be catastrophic for its domestic production, particularly as it attempts to develop technically challenging heavy oil reserves," Lugar said.

"Even more importantly, the people of Venezuela could suffer tremendously and its economy could be crippled if oil revenues are lost," he said.

Venezuela is the fourth largest foreign oil supplier to the United States, and U.S. refineries are configured to handle the type of dirty crude oil that Venezuela produces.

(Reporting by Tom Doggett; Editing by Christian Wiessner)