Hugo Chavez Dies: Good for Commodities?

The flamboyant and egotistical leader of Venezuela - Huge Chavez - died Tuesday after a two-year battle against cancer. The question now is will there be a more business-favorable replacement of Chavez, or will Venezuela remain a backward, socialist country barely able to make it.

Chavez bought the love of the poor in the country by nationalizing industries and then feeding some of the poor while offering them free health clinics in the poorest parts of the country.

Those that he bought using the goods and capital of others will miss him, but the cost of nationalizing energy especially, as always, results in a loss of production.

Opponents of the mini-dictator will be glad he is out of the way as he has largely wasted the natural resources that would have, and should have, been put to better use. Unfortunately, socialists can't see the devastating effects of wealth distribution, and over time always end up being a destructive force.

Assuming Vice President Nicolas Maduro steps into his shoes (or whoever does), it'll be interesting to see if policies in the country towards commodities continues on. Since there are always large numbers of poor under wealth redistribution schemes, it's going to be hard for whoever follows Chavez - even if they were more favorable to capitalism - to change things without social unrest that comes from government dependence.

Maduro does appear to have a strong lead over his competitors to replace Chavez, but it's not clear if he has the charisma and strength to follow in the footsteps of goal of Chavez. He has said he wants to continue on in that vein, but rhetoric is different from reality, and pressure will rise from a variety of places to get what they want.

It was the somewhat benign but bombastic personality of Chavez that allowed him to get away with what he said, which was really more theater than a true threat. Madura doesn't have that same personality, so it could be much harder for him to command the attention and faithful and adoring followers Chavez did.

As for commodities in the country, it's unlikely some major change will happen in the near term, but there is always a point in socialism, as history has proven over and over again, when it can no longer sustain itself.

Many in Venezuela see that, and they are the ones hopefully that will influence the country going forward; no matter who ends up leading it.

Interestingly, the more desirable and probable opponent of Maduro, Capriles, would probably have beaten Maduro under any other circumstance, but he is likely to ride the emotion people have attached to Chavez and now passed on to him when Chavez picked him as his preferred successor in December 2012.

Maduro has positioned himself as a Chavez clone, but it's almost assuredly so he would be in the position he is in at this moment. More than likely we'll find out if he is really a Chavez or a pretender seeking power. Hopefully it's the latter.

BP (NYSE:BP) Keeping Deepwater Assets

BP (NYSE:BP) and partner TNK-BP, a joint venture between BP and Russian billionaires, announced today they have a confirmed deal is now in place over some assets held in Venezuela by BP.

The oil giant has been selling a number of assets, and others are on the block, in order to raise around $30 billion to pay for growing liabilities from the Gulf oil spill.

A number of onshore and natural gas assets have already been sold.

With the oil future in deep water though, BP is holding onto those assets, and aren't considering selling them. That includes natural gas deepwater drilling off of Azerbaijan.

Contrary to what appears to be a move away from deepwater drilling, it is in fact expanding fast, as huge resources are believed to be in waters which have had little, if any, exploration done on them.

With the huge known natural gas reserves discovered, many energy companies are doubling their efforts in the much more profitable oil sector.

BP's (NYSE:BP) Algerian Assets Also Interest Gazprom

The BP (NYSE:BP) joint venture with Russian billionaires called TNK-BP, may have some other competition from mother Russia, as the giant Russian energy company Gazprom has said they would be amiable to looking at an acquisition of BP assets in Algeria.

"If the Algerian side offers these assets to us, we will consider this possibility," said the company in response to a question from a reporter.

Rumors have circulated for some time that TNK-BP was possibly interested in the Algerian assets of BP, with Chairman Mikhail Fridman confirming that was the case on Wednesday.

This is part of the divestiture of BP assets in order to raise up to $30 billion to pay for its mounting liabilities from the Gulf oil spill.

Assets held by BP in Algeria are valued at approximately $3 billion.

TNK-BP is also interested in assets held by BP in Venezuela and Vietnam.

BP (NYSE:BP) Approved by Venezuela to Sell Oil Assets

In an attempt to raise up to $30 billion to pay for liabilities related to the Gulf of Mexico oil spill, BP (NYSE:BP) is trying to sell assets in Venezuela, and they've been given approval by the government to go ahead with the process.

The assets held in Venezuela include an interest in heavy oil and minority stakes in two exploration and production ventures with state-owned oil company PDVSA.

Combined it is estimated BP should be able to raise up to $1 billion from the assets. Although a relatively minor deal in comparison with others, it is one of the bigger challenges for the company to divest of.

The only two companies considered a buyers for the stakes are PDVSA itself, and possibly the joint venture of BP with Russia called TNK-BP. The Russian connection would make it more palatable to Venezuela.

BP holds a 50 percent stake in TNK-BP, which also has interests in Vietnam and Algerian assets held by BP.

BP (NYSE:BP) Venezuela Assets Not Officially For Sale Yet

About a week ago BP (NYSE:BP) let Petroleos de Venezuela SA (PDVSA) Vice President Eulogio del Pino know it was interested in selling its stakes in the Boqueron and Petroperija oil fields and the heavy oil-upgrading project of Petromonagas.

This is part of the initiative by BP to raise up to $30 billion to help pay the costs related to the Macondo oil spill in the Gulf of Mexico.

Evidently Rafael Ramirez, president of PDVSA, the Venezuelan state-owned oil company, but also the oil and energy minister of Venezuela, wants the assets badly, and noted BP hasn't officially requested permission to sell the Venezuelan assets.

Authorization is needed, and it seems that authorization must come from Ramirez.

BP wants to sell the assets to its Russian joint-venture partner, TNK-BP.

Strategically that's not a bad move, as Venezuela would be more apt to sell to a Russian partner than possibly any other partner.

The three projects account for the production of about 130,000 barrels a day.

Oil Reaches Another High on U.S. Inventory Concerns

Oil prices climbed to almost $106 a barrel, as inventory surprisingly fell by 1.3 million barrels, after seven straight increases.

Most of that was in response to U.S. supplies being lower than expected.

Other problems affecting the price were the recent decision by OPEC to not increase production, as well as the continuing tensions between Columbia and Venezuela.

Oil inventory as of the early part of 2009 has dramatically changed, as the contango, or rather - super contango conditions has resulted in oil futures buyers starting to store there oil as oil futures prices stretch out more predictably, and the perfect arbitrage opportunity exists for those looking for something that is not only safe to invest in for 2009, but will also make them some money.

The super contango for oil is one of the few guaranteed commodity futures winners for 2009, and one of the few overall investment winners overall.

Commodity investing in certain sectors will be the best investment over the next several years, and those investing in strategic commodity sectors will do very well.