Venezuelan Top Court Backs Inauguration Delay

Venezuelan President Hugo Chavez
Gregorio Marrero | LatinContinent | Getty Images
Venezuelan President Hugo Chavez

The Venezuelan Supreme Court ruled today that the inauguration of Hugo Chavez to a 3rd term as president of the country may be delayed, per his request.

With that decision, however, the court plunges a key supplier to the world oil market into a period of deep uncertainty, as the nation grapples with Chavez's prolonged absence from his home country.

Chavez was supposed to be inaugurated into his 3rd term as president of Venezuela tomorrow, January 10th. Yet he remains in Havana, Cuba, where he is being treated for an unknown form of cancer.

Last night, Venezuela's Vice President sent a note to the nation's legislative body claiming Chavez had requested a delay in his inauguration until he can return to the country. The legislature, controlled by Chavez supporters, promptly agreed.

The opposition says this is a violation of the constitution which, as they interpret it, says an election must be held within 30 days. On the flip side, Chavez supporters insist he can be sworn in by Venezuela's top court at a later date.

This may all be academic. Chavez hasn't been seen in weeks,and there is intense speculation he doesn't live much longer if he is even still alive. The last time Chavez was seen in public: his arrival at the Havana airport on Sunday December 9th.

However, since his surgery on December 11th, there have been no photos or video. Instead, there have been vague updates about "complications" and his "delicate" situation. The situation has led to"proof of life" demands from the opposition.

In other words, a photo or video of him with something that indicates proof of the date.

Additionally, because Chavez has undergone multiple surgeries for tumors in the stomach, doctors speculate that his survival is questionable. According to articles from Venezuela, his former family doctor says he's been told by Chavez' family that he is suffering from sarcoma (cancer of the soft tissue).

Venezuela has the second largest oil reserves in the world — 211 billion barrels, according to the US Energy Information Administration (EIA).They are the fourth largest supplier to the US, providing 951,000 barrels per day, according to EIA data.

Venezuelan oil bonds, more widely held in fixed-income portfolios than you might expect because of their relatively high yields, rallied dramatically in 2011 on word that Chavez was sick. However, in the last week,the bonds have fallen on fear that in the short term, the situation could get messy and civil unrest could ensue.

"The current situation appears to revive the possibility that an opposition candidate could take over the presidency and with it begin to usher in economic reforms that could improve Venezuela's credit picture in the mid-term," wrote Aaron Freedman of Moody's, in a research note.

He added that in the short term, these potential benefits are outweighed by the risks that could occur during a political transition.

—By CNBC's Michelle Caruso-Cabrera; Follow her on Twitter: @MCaruso_Cabrera