By Marianna Parraga

HOUSTON, Aug 29 (Reuters) - Venezuela's state-run PDVSA has put on hold its plans to export diluted crude oil (DCO) in October as the company reviews production costs that have risen on imports of costly naphtha that it uses to mix with its extra heavy crude, traders told Reuters on Friday.

The move comes as the company scrambles to cut costs to partially solve its well-known cash flow problems. Reuters reported on Wednesday that PDVSA is considering importing Algerian Saharan Blend light crude instead of costly naphtha that it has been buying since 2013 to use for its blends. .

One of several sources who was told of the halt by the company said it might also try to raise DCO prices to better offset import costs.

"Sales of DCO are suspended, but PDVSA said it won't stop production of these crudes. It will use its facilities in the Caribbean to store them and it is even considering to use tankers for storage," one source said.

PDVSA has two storage facilities in Curacao and rents tanks in Aruba and the island of Saint Eustatius from U.S. oil firms Valero Energy and NuStar Energy. From there, it loads very large crude carriers (VLCC) to Asia.

Most of the diluted crude oil produced by PDVSA is absorbed by its U.S. refining arm, Citgo Petroleum, but other firms such as Valero and Chevron also receive cargoes regularly.

It is still not clear if putting DCO exports on hold will lead to a drop in naphtha purchases.

PDVSA recently awarded to firms Petrochina, Delaney and Noble Group a tender launched in July to import at least four 500,000 barrel cargoes of heavy naphtha for September-December.

With the world's largest reserves of crude, Venezuela's plans to start importing foreign crude have shocked the OPEC member country.

The Venezuelan company did not immediately answer requests for comments.

Another source added that PDVSA has not sent to its customers its export plan for October.

The export plan for September, including DCO shipments to different clients, will be honored, the sources added. PDVSA does not disclose its monthly production and export volumes.

(Reporting by Marianna Parraga; Editing by Terry Wade and Phil Berlowitz)