Venezuela's state-run oil and gas firm PDVSA is cutting production by 129,000 barrels per day, according Venezuela's Oil Ministry and PDVSA officials.

The decision comes on the heels of the recent decision by the Organization of Petroleum Exporting Countries to cut production across the board by 1.5 million bpd.

Venezuelan Oil Minister Rafael Ramirez prompted OPEC leaders to cut production levels even more in hopes of stemming the recent dramatic drops in oil prices.

Continually falling oil prices could prove detrimental to Venezuela's wide-ranging spending on projects as diverse as social programs at home, military spending and discounted petroleum sales to Venezuelan allies such as Cuba and several other Caribbean and Central American countries.

The Venezuelan budget for the coming year is based on a price-per-barrel average of $60. With the global price of oil currently hovering around $70, Caracas should be able to meet its projected spending for 2009.

However, some speculate that the Venezuelan government could be forced to rethink some of its more costly projects, both at home and abroad.

The falling price of oil has prompted Venezuela to urge OPEC to set a "minimum barrel" price for oil in the $70 to $80 range.

Meanwhile, falling oil prices would also force Venezuelan President Hugo Chavez to reconsider his professed desire to reduce oil sales to the United States in favor of alternative trade partners.

While Venezuelan oil exports to the United States have, in fact, dropped noticeably over the last year -- falling 11.7 percent in the first quarter of 2008 alone -- a sustained drop would become economically unfeasible were oil prices to continue falling.

Past threats by Chavez to cut off oil exports to the United States altogether seem even less likely.

As the fourth-largest exporter to the United States, Venezuela can hardly afford to shut off supplies to the United States, even for a short while, said Patrick Esteruelas, a Latin America analyst for the New York-based think tank Eurasia Group.

"The Venezuelan government has become more and more dependent on oil, and oil exports to the U.S. in particular, making it highly unlikely that Venezuela will cut off oil supplies to the U.S., despite the latest threats," said Esteruelas.

Venezuela, however, has bolstered its ties with oil-hungry customers like China, a relationship that the leftist Chavez remarked would only grow stronger as the two nations increase their petro-business relations.

Chavez has designated China as the No. 1 alternative to the United States, though China's per day import of Venezuelan oil still pales in comparison to U.S. consumption.

Erik Kreil, an international oil market analyst at the U.S. Energy Information Administration, noted that while Venezuela appears eager to lessen its reliance on the United States, China's energy demands, albeit growing rapidly, are still not as great.

"China can only take so much," Kreil told United Press International. "The bottom line is there is only so much they (Venezuela) can diversify away" from the United States.

Despite current limitations, Venezuela and China have been laying the groundwork for an expanded energy relationship in years to come.

In 2006 Chavez traveled to China to sign an $11 billion deal on mutual energy and transportation development, which laid the foundation for close ties.

A year later Venezuelan and Chinese state petroleum companies said they would spend more than $10 billion to develop the Orinoco basin, which contains Venezuela's largest oil deposits.

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