Oil futures rose as uncertainty over the health of Venezuelan President Hugo Chavez brought the country, a major U.S. oil supplier, back into focus Tuesday.
Venezuela has been low on the list of concerns for the oil market recently, but a downturn in the health of Mr. Chavez and reports of the expulsion of a top U.S. official have brought it back to the fore.
"We've all been trying to take a view on what would happen in Venezuela in the aftermath of his demise," said John Kilduff, founding partner at Again Capital in New York. "I think the consensus is the status quo would be maintained, but these statements are fairly menacing and things may be more destabilized than we thought."
Light, sweet crude for April delivery settled 70 cents, or 0.8%, higher at $90.82 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently rose $1.68, or 1.5%, to $111.77 a barrel.
Venezuela said Tuesday it was expelling two officials at the U.S. embassy in Caracas for plotting against the government. The news came a day after the country said Mr. Chavez had developed a "new and severe infection" following cancer surgery.
Also Tuesday, the country's vice president, Nicolas Maduro, blamed Mr. Chavez's worsening health on "enemies of the fatherland."
Venezuela is a major oil exporter to the U.S., but developments there have been overshadowed by fears about Iran's nuclear program and instability in the Middle East and Northern Africa in recent years.
Still, the country--a member of the Organization of Petroleum Exporting Countries--is the fourth-largest exporter of oil to the U.S. behind Canada, Mexico and Saudi Arabia, according to the U.S. Energy Information Administration.
Mr. Kilduff said Tuesday's developments suggest that a post-Chavez transition of power might not be as smooth as previously expected.
"I thought the consensus was it would be a Castro-style transition where everything was all lined up," he said. "It might not be that now."
Andrew Lebow, senior vice president of energy futures at Jefferies Bache, said uncertainty over the fate of Venezuela could lead to some short-term increases in the price of oil. But he expects little to change in the country in the short term.
"They need some serious reforms in their energy sector. The only way that's probably going to take place is if the opposition wins," Mr. Lebow said.
Front-month April reformulated gasoline blendstock, or RBOB, settled 4.99 cents, or 1.6%, higher at $3.1482 a gallon. April heating oil settled 5.39 cents, or 1.9%, higher at $2.9730 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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