Venezuela's state oil company PDVSA has announced it is suspending sales of crude to Exxon Mobil, in response to legal action brought by the US firm.
Hugo Chavez is a leading champion of oil nationalism
President Hugo Chavez has said he will no longer do business with Exxon which he says is not welcome in Venezuela.
Exxon wants compensation following the nationalisation of a project in Venezuela's largest oil reserve - a demand the US has said it supports.
The firm receives about 2% of its supply from Venezuela.
It has a refining joint venture with PDVSA, the Venezuelan state energy company, in New Orleans which has not been affected by the disagreement, Exxon said on Wednesday.
This is a fight between two giants - Exxon Mobil, the world's largest private oil firm, versus PDVSA - says the BBC's James Ingham in Caracas.
A recent court ruling freezing some Venezuelan assets in the country's Orinoco Belt pending arbitration outraged President Hugo Chavez.
He has accused Exxon of plundering the nation's resources, claiming their action is part of a wider "economic war" backed by the US government.
Around $12bn (£6.1bn) worth of PDVSA assets have been frozen by the legal action.
The US fully supports "the efforts of Exxon Mobil to get a just and fair compensation for their assets according to the standards of international law", said state department spokesman Sean McCormack on Wednesday.
But he said the US government would not intervene in the dispute, which should be settled by court ruling.
Implications for future
Mr Chavez has retaliated by cutting oil supplies to the company as well as all commercial relations.
The amount is not huge, our correspondent says.
But the move does put an end to any hopes the company had of negotiating with Venezuela and returning to future projects.
Meanwhile, Mr Chavez is still threatening to cut supplies to the United States if Venezuelan interests are adversely affected by legal action.