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LONDON (Thomson Financial) - Oil held onto earlier gains as fears over the US economic slowdown were overshadowed by lingering worries the standoff between ExxonMobil and Venezuela could worsen, further disrupting US supply.

"At the moment, various short term supply fears are still overwhelming economic worries," said Sucden analyst Andrey Kryuchenkov. He added, however, that economic worries could yet take centre stage again.

"Any more negative economic news or disappointing data could quickly turn market participants' attention back to economic fears, while future gains in crude prices would be capped in this case," he said.

Oil prices were on a downtrend for much of January amid fears a US economic slowdown will crimp demand for crude, especially if it spills over into the broader economy.

They have recovered sharply over the past week, however, partly because markets have taken the view that the view the ExxonMobil-Venenzuela spat still poses a serious risk to US supplies.

At 4.40 pm, New York's WTI crude for March delivery was up 50 cents at 96.00 usd a barrel, in quiet trade with US players away for the Presidents Day holiday.

In London, Brent crude for April delivery was up 28 cents at 94.91 usd per barrel.

Venezuela President Hugo Chavez said on Sunday his country could sue ExxonMobil for unpaid taxes. He also said he would cut off all US oil exports if Washington "attacks Venezuela or tries to harm us".

US oil giant ExxonMobil is currently in arbitration with Venezuelan state oil company PDVSA over the nationalisation of assets in which it had an interest.

Its successful bid to freeze assets held by PDVSA in the European courts last week led Chavez to threaten to cut off oil supplies to the US.

Chavez has since settled for cutting oil exports only to ExxonMobil. The reduction to date is not significant, as Middle East producers have assured the US they can make up for the Venezuelan short-fall.

All the same, oil market players remain concerned the reduction could become significant if the dispute intensifies. Venezuela is the fourth-largest supplier of crude to the US.

Elsewhere, speculation oil cartel OPEC could cut output quotas at its upcoming March meeting -- after Iranian oil minister Gholamhossein Nozari mooted the possibility over the weekend -- was also lending some support to the market.

Speaking to reporters in Tehran, Nozari said "in the normal course of events" a production cut in March would be expected, although he reiterated the cartel would closely review the market before making a decision.

Both Iran and Venezuela have previously called for a reduction in output to protect prices. Although oil remains near its all-time high above 100 usd a barrel, the sliding value of the US dollar has cut oil vendors' spending power overseas, they say.

However, with the US facing a recession, which could potentially affect wider global growth, the cartel is unlikely to pile on further economic pressure by pushing oil prices higher still, analysts said.

The US will pressure its OPEC allies -- most notably Saudi Arabia, the organisation's biggest producer and de facto leader -- not to cut production, which is also likely to have some influence on the final decision.