Oil on the boil!!!

“it's at $110, now edging $117, omg! someone just said $220! its getting higher…getting higher…aaah!” I had a general idea on why the oil prices were going up…but can someone really visualize a globe with oil prices at 220!!!. The guys at Nomura who sent a "Oil Market Update" on 23rd Feb 2011 think its quite a possibility. I was keen to learn about the method en route to this bet. Before that, let me confess, I badly needed to get my head around some basics of this oil business, because trust me, in the coming weeks, coffee table conversations would all revolve around this topic.

So I went to the Texan and said “What’s the meaning of oil at 110?” He said “That’s the cost of door delivery at Cushing, Oklahoma (USA) for 158.9 liters (one barrel) of light crude oil or delivering the same quantity of Brent (Oil) at a place called Sullom Voe in Scotland, you Stupid”. I wasn’t done yet “Ok, so if there are millions of barrels of oil being transported…who the heck is this company which makes all these empty barrels?”. Clearly Mr. Tex was amazed at my ignorance “They stopped sending oil in barrels when oil tankers were invented, Stupid”. I have one more question for an encore “errr… am assuming oil tankers are cheaper to transport oil than transporting them in barrels in a cargo ship, which is why they stopped oil barrels, right!” The guy was shocked “You are so..so stupid Anup, didn’t you even know that way back in the 20th century, in Russia when they were still using oil barrels, half the cost of petroleum production went to manufacturing of these leaky unreliable barrels. I’m also guessing Anup, you don’t know that, the average cost of oil transportation via an oil tanker is only 2-3 cents per gallon…” (Oh! I can delete this paragraph of my conversations with Mr. T, because you guys knew all of this; apologies.)

Coming to Nomura’s research. This is what they had to say on Oil at $220 :

“In order to estimate the possible impact MENA crisis has on oil supply and prices, we analyse the past crises that have rocked the region. There have been a few events that drove oil prices higher, most of which are during the period in which OPEC controlled oil prices. For example, during the 1973 Arab-Israel war, OPEC increased oil prices by US$6.5/bbl or 128%, while in 1979-1981 the Iran revolution followed by the Iran-Iraq war saw oil prices move up by about 77%. In fact the only major event that is comparable is the Gulf War in 1990-91 as it is the only event in the Middle East which seems close to the ongoing crisis during the free-market pricing era. Before the Gulf War, OPEC spare capacity stood at 5.9mmbbl/d. During the war, OPEC production capacity was severely reduced (OPEC spare capacity came down to less than 2.0mmbbl/d) and oil prices jumped 130% in a period of two and a half months”

Gulp…ok, so there is precedence and with Gaddafi still hanging around in Libya...(maybe i should just go back to farming olives). What category of an economic havoc does a jump even half the size of what is mentioned above happen in an already weakened European Union or United States! Wait read on ..there’s more

"If Libya and Algeria go offline, one can see a 3.1mmbbl/d of reduction in production…., we could see a spike in oil prices in case supply is actually disrupted, given the uncertainty that it would bring. Based on the Gulf war, coupled with the fact that demand is much higher now, we estimate oil could fetch well above USD 220/bbl, should libya and Algeria stop production."


After reading till now, am assuming everyone’s on their seat edges and waiting for the climax (reading becomes faster…) Is this the reason for oil to touch $220. Is there anything more…let's keep reading

"Currently, OPEC spare capacity stands at 5.2mmbbl/d with 3.5mmbbl/d of that coming from Saudi Arabia. As a result, we believe that there is enough spare capacity available in the OPEC to ward off any near-term supply disruptions owing to the crisis as it stands currently. If the situation in the region were to worsen in a way that it encompasses other oil producing countries as well in the future, the oil supply-demand balance could change very rapidly. In particular, if the crisis were to spread to Saudi Arabia, , there can be real threat to global oil production, the impact of which is impossible to ascertain on prices….Overall, we do not rule out the possibility of oil prices touching record highs in excess of US$220/bbl in the near term, should the MENA crisis continue to spread over the coming weeks "

Phew...So there are two caveats in this whole $220 story by Nomura:)

1) There’s spare capacity in the United States of Saudi Arabia, which could be tapped on request

2) This scenario is only possible with Saudi Arabia also joining the party with Libya and Algeria (Fat chance of KSA slipping into any chaos)


Ok guys, go back to your boring lives now, there’s nothing called Crude at $220 anytime soon. For those interested in this sensational report by Nomura , you can download the Nomura Research out here via Scribd.

The odds of freedom

I overheard someone saying "Is the world as I have known it, coming to an end? Everything seems to have turned upside down!!!" . How true, we have not even completed 50 days in 2011 and have seen two revolutions begin and end with an outcome, and those two sparking off several more freedom struggles across the region.

I have friends who have participated in the freedom struggle, friends who landed up in these countries on regular business trips and got caught up in it, friends who tweeted without sleeping across these times, but what I definitely do not have is a friend who has bet his money on a fall of a regime. Even the most die hard of Egyptian revolutionaries were unsure of the outcome of their protests, though they protested, wished and prayed for the fall. Why am I saying all this, well here goes…

I realize this may be trivializing the whole revolution story a bit, but couldn’t resist posting this and adding my two bits of thought into it. The Telegraph says that, Paddy Power – an Irish Bookmaker is offering odds on the next country to force their leader down and says Yemen is the clear favorite in the same.

Paddy Power is a blocked website in the country I live in (can anyone post me the latest odds please on the comments section),but this is what the Telegraph says are the odds offered by Paddy Power on a revolution.

15/8 Yemen
9/4 Jordan
7/2 Algeria
7/2 Morocco
8/1 Bahrain
12/1 Iran
16/1 Libya
16/1 Sudan
16/1 Iraq
20/1 Saudi Arabia
20/1 Syria

For the uninitiated on betting odds, it means they say Yemen are clear favorites for a revolution while Syria has the lowest chances of any among the list.

What do I have to add:

- If you’re a betting person, I’d suggest you put some money into the Bahrain bit. The odds are quite good to make some money

- The list has Iraq in it, wonder why. Who’s the leader anyway out there????

- Did you notice UAE and Qatar are not on the list ; am all smiles. Lovin it..lovin it :)

The secret to happiness is freedom, the secret to freedom is courage; here’s wishing the oppressed and demoralized, the courage to stand up and fight for their happiness....

Fat Cats in the Middle East!

A friend of mine posted a link on a social networking site, and I decided to dig into it over the weekend, as I needed a break from work and this entire non stop Egypt telecasts. A certain Professor Majid Ezzati of the Imperial College, London along with his team conducted a 28 year research (1980 to 2008) on global obesity trends and published it a few weeks back. If you go to the link, you’ll find the research results on a well designed online dashboard on global BMI (Body mass index) levels etc.

Before I say anything else, let me congratulate all of you living in the GCC, you just made it to the top of Professor Ezzati’s list of the fattest people in the world. The GCC ranks among the fattest in the world (With so many bankers (fat cats) in this region, that must have been easy to plot) .But after two decades of analysis the professor and his team have figured that the thinnest people live in Congo and the fattest people live in some pacific island country whose name I cant even pronounce (Nauru), but that’s not the reason for this blog post.

If you dig into the stats of the GCC Region, this is what comes up,

- As per the global ranking Kuwait ranks among the top 10 fattest countries in the world even beating Burgerland United States of America to it.

- Qatar is not that easily beaten and ranks among the 11th fattest country in the world closely followed by United Arab Emirates ranked number 13.

- If you sort the data by sex, Kuwaiti women seem to be fatter than the Kuwaiti men, while Qatari men are fatter than Qatari women.

- The fattest people in the GCC live in Kuwait and the thinnest live in Oman. GCC rankings are as follows (Fattest to thinnest) – Kuwait(29.15), Qatar (28.14), UAE (28.05), Saudi Arabia (27.91), Bahrain (27.82) and Oman (26.24)
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On a global level: Congo has the thinnest people in the world (wonder if it has to do with the fact that you can’t easily find a McDonalds or KFC in Congo), followed by Ethiopia, Bangladesh and Afghanistan (no wonder the afghans seem to be running circles around the NATO security forces)

Europe: The Irish are the fattest Europeans (ok…cant blame them..Irish cream is not exactly made out of low fat milk is it?) and the Italian studs are the thinnest of them all

Asia angle: The Vietnamese and the Indians rank among the top 10 thinnest countries in the world ranked number 9 & 10. I can vouch for the Indians being thin from the angle that Indians discovered the Veggie burger only a few years back, but Vietnam…anyone has a theory on that one?

As always, am wondering how the government PR spin doctors, will spin this data and make it sound positive, if they ever come across it. Who knows, tomorrow’s road show opening line or newspaper headlines could be – “D^&% is such a great city to make money that in no time we’ll turn you all into fat cats and now its been substantially proven, another reason why you should buy into our Sukuk!!!

Thank you

What’s in a four letter word…?

Four letter words can pack quite a punch as we all know very well, right!. When Jim o’Neill of Goldman Sachs uttered the four letter word ‘BRIC’ in a research report on emerging markets way back in 2003, he had the whole financial and political world chanting it in unison. The second time around Jim got around grouping countries and creating a new four letter acronym, he had the world watching him very closely. I would believe he would be so powerful an economist by now, that there would be countries lobbying to just get into his list.

FT news on 17 Jan 2011 reveals (Article titled: BRIC creator adds newcomers to list) that Jim is about to release his next batch of emerging countries four letter word this month. (It’s a side story that Jim is a lazy guy who takes 7 years to come up with a four letter word). As per the news report, Goldman Sachs Asset Management plans to add Mexico, South Korea, Turkey and Indonesia into this new grouping and it goes on to quote Jim O’Neill who said that ‘any economy from the emerging markets world that is already 1 per cent of global GDP or more, and has the potential for that to rise, has the ability to be taken seriously’

I did my paper napkin math and what he says does add up. The World GDP (Nominal) is at USD 58 Trillion and all of Jim’s new countries seem to be above the 1% of world GDP inflection point. Turkey has a GDP of around USD 600 Bn, Indonesia has a GDP of USD 540 Bn, South Korea has a GDP of 840 Bn while Mexico leads the pack with 880 Bn.

With some smart global lobbying and Goldman Sachs apple polishing, some policy maker in Saudi Arabia (At 440 Bn..they're a few hundred billion short of Indonesia...but closing in fast) or maybe Egypt (similar population as Turkey...ahem GDP is a bit lower) should have tried to make a pitch to these guys to get included. I understand there may be more reasons that what I want to know to start thinking why Iran could not lobby itself into the list, but the others surely are Big Brother’s regional darlings, aren’t they? Someone once told me“Everyone is beautiful, if you squint a bit”, hmm...am wondering how much you need to squint for UAE to make it into this list :-0

The amount of global publicity that Goldman Sachs has got out of coining this smart little term, gave quite a few smart alecks an idea to copy and come up with similar acronyms. For Eg; There’s this certain private Equity Fund manager in UAE which kept harping on a 6 letter word and included a whole bunch of disjointed countries from the Middle East, North Africa and South Asia (you’ve probably guessed the name by now) in every presentation by its management. I mean think about bit, who in the right mind would take them seriously if it includes on one side a country which just had a revolt, another country which had the biggest floods history has ever seen and 20 others. Well so much for that superpower economic bloc term and its creators.

My guess is that the guys at Goldman Sachs would be thinking even harder than last time around since they have to live up to the success of BRIC. My take is that they’d call it The MIST Economies (Mexico, Indonesia, South Korea and Turkey), but we’ll have to wait till the end of the month to know that.

Well here’s wishing the good folks at Goldman Sachs all the very best with their second four letter word creation.

What’s in a name…well sometimes everything? What say?

James Bond and the Middle East markets

We’ve seen quite a bit in 2010, haven’t we, and if you ask me it’s almost been like watching a James Bond Movie with its high points, creepy suspense and finally the ‘good guy saves the world’ moments. Scandals, unexpected stock market busts, political turmoil, bad guys beating up the good guy and finally histories (sporting) being created. Over the Christmas weekend, I was having lunch with a friend and we got into discussing the same and comparing the stock market with a action thriller movie and here’s the thought.

You're watching a thriller, you laugh at the happy moments, lose interest at the slow dragging dialogues and then when the suspense creeps in and the movie twists and turns, it scares the living daylights out of you. The movie could as well be called “The Middle East stock Market” and it wouldn’t be any different.

Ok, there are no blond babes and Daniel Craigs in tight shorts strutting around (thankfully) in our 3000Xtra/ Eikon terminals, but think of it laterally and you’ll find a action thriller storyline no different from DFM, ADX, Doha or Tadawul markets. In a Bond movie for example – we know what we’re getting into even before the movie begins, Bond is going to walk around with the coolest gadgets, hottest babes and get himself nearly killed (remember you nodded in agreement with the word ‘nearly’).

Take this classic James bond movie clip (Click Here) , Bond is all tied up and has a laser which is slowly going to cut him into two pieces and burn his “ahem! ahem!” off. Even if we have 30+ years of past James bond movies (stock market) data, which points out that James Bond cannot at any instance have his “ahem! Ahem!” burnt into fine dust particles; you still sit up at the edge and experience anxiety and tension, wondering ‘what next’.

Ever thought why this happens, and the only answer we could figure out was that , we experience this anxiety because in those 'moments', we're not only following the movie (stock market) with our eyes, but also our brain cells move into autopilot and an emotional brain takes over.. That means the intellectual brain goes into sleep mode and the emotional one takes complete control. Makes sense?

When we’re watching the movie (market), we’re not thinking of the long term, we’re sucked into thinking of the moment and we get drawn into the emotion and struggle to see the big picture. If the movie shifts from being a James Bond movie to watching ‘Dracula’, what would be the reaction - we hold our partner’s hand tightly (strictly speaking it may not be the way it happens in the market situation). Ok, maybe you don’t hold your partners hand, you probably just close your eyes..right?

I think its great advise when someone says with reference to the market that - Get out of the momentary reaction (short term) and focus on the big picture (long term), its also great advise when someone tells us to supplement emotion with intelligence when handling the stock market…but hey, it would make the whole James Bond movie one heck of a bore!!!

All this year end intellectual exercise is fine, but hey what’s a good ol’ action thriller without enjoying its moments :)

Happy New Year 2011 to all of you,

A City is where your heart (money) is...

Guess what, some nut offered me this really juicy offer from New York a month back and I decided to say no to it. No I’m not mentally ill; I just have a problem with reality. To top the job losses, and meager commissions, the poor investment banking souls I know down there are into their last million and are still taxed to death.

I wanted to quantify my argument, since my wife had already started apartment hunting in NY when she heard about this. I did a bit of research and came across this interesting study done by Mercer Inc (www.mercer.com). It’s called the Worldwide Cost of Living Survey 2010. From what I could read, these are the cities which I knocked out of the list and here’s a few surprise cities I’ve added

- Africa : I know Africa is booming, but just in case you get a $$$ million dollar offer from a blue chip investment bank in Luanda, Angola, remember it’s the most expensive city in the world for expats to live in. Chad and Gabon are also quite expensive and rank number 3 and 7 globally. Errr..and just a bit of friendly advise from someone who’s been quite a bit,.” In case you didn’t know…everything. I repeat everything.. in Africa bites too’

- Europe: Oh Africa is not in your radar and its Europe, I would highly recommend that you ignore all offers from London, Paris and Frankfurt and if you get one from Tirana in Albania, grab it with both hands. It’s apparently the cheapest city to live in all of Europe!!!! Oh! You’ve accumulated a zillion miles on Skywards already, am not sure what you’ll do with that, the only airline which could take you to Albania is Albanian airlines and they fly converted Hercules and Antonov Cargo planes.

- Americas: You’re looking at the Americas, how nice, you and my wife will get along well….the last I heard the economic crisis is so bad out there, they caught a truck load of Americans trying to sneak into Mexico!!! On a more serious note, It turns out Sao Paulo (21), Brazil is more expensive than New York (27). If any of you get tickled into packing your bags for this rapidly developing economy, you’d better read the fine print very carefully. Am sure most of us won’t look very good dancing around in a thong at the Rio Carnival to earn a few extra bucks to make ends meet.

- The United States of India : And if you thought you should take revenge on Indians because they just off-shored some jobs from your office to Slumdog millionaire country, think again. Someone calculated that if you’re a single guy with no kids and were offered a Million dollar job in Mumbai, 458K would get eaten up by the tax bogeyman. So let’s get India out of the list too.

Just for the heck, let me throw in some stats which I found on another blog (Singapore Hedge Fund) “KPMG’s calculations are based on the assumption that the employee is single, has no children and earns a salary of 1 million pounds a year. Tax and social security payments are calculated from Jan. 1 to Dec. 31, 2010 As of April 2010

City -->Income Tax -->Social Security -->Total
London --> £477,519 --> £13,759 --> £491,278
Frankfurt -->£476,469 -->£10,339 -->£486,808
Paris -->£350,786 -->£110,342 --> £461,128
New York -->£414,250 -->£18,520 -->£432,770
Tokyo -->£349,655 -->£12,260 -->£361,915

Good ol Dubai, Abu Dhabi, Jeddah and Muscat rank quite low in this list!!! Add in the Sun, the bling, gasoline costs and friends like you, I’ll happily pay my traffic fines and toll tax and stick around here for some more time.

Stick around guys and God bless!

To all those who taught me how to hunt!

The dream begins with a teacher who believes in you, who tugs, pushes, yells but leads you through the crossfire, sometimes poking you with a sharp stick called 'truth'

I have been fortunate to have had some of the most amazing teachers at work and life. What I am today is undoubtedly because of having had the good fortune of having either directly or indirectly worked under these awesome guys . When I happened to come across a video the other day (posted by another person whose blog I admire a lot ), it reminded me of similar situations where I have been through at work. Have a peek at Al Pacino's speech from 'Any given Sunday' . If only I had recorded some of the moments at work on a camcorder, they would not have been any less inspiring! Read on or watch the video on youtube on the link provided.

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I have reproduced the Al Pacino speech for easier reading below

I don't know what to say really. Three minutes till the biggest battle of our professional lives. It all comes down to today. Now either we heal as a team, or we're gonna crumble. Inch by inch, play by play, till we're finished. We're in hell right now, gentlemen. Believe me. And we can stay here, get the shit kicked out of us, or we can fight our way back into the light. We can climb out of hell. One inch at a time.


Now I can't do it for you. I'm too old. I look around, I see these young faces, and I think... I mean I've made every wrong choice a middle-aged man can make. I pissed away all my money, believe it or not. I chased off anyone who's ever loved me, and lately, I can't even stand the face I see in the mirror. You know when you get old in life, things get taken from you. That's part of life. But you only learn that when you start losing stuff. You find out life's this game of inches. And so is football. Because in either game, life or football, the margin for error is so small. I mean... one half a step too late or too early and you don't quite make it. One half second too slow too fast, you don't quite catch it. The inches we need are everywhere around us. They are in every break of the game, every minute, every second. On this team, we fight for that inch. On this team, we tear ourselves and everyone else around us to pieces for that inch. We claw with our fingernails for that inch. Because we know when we add up all those inches, that's gonna make the f%*ing difference between winning and losing! Between living and dying! I'll tell you this - in any fight, its the guy whose willing to die who's gonna win that inch. And I know if I'm going to have any life anymore, it's because I'm still willing to fight and die for that inch.Because that's what living is! The 6 inches in front of your face...


I can't make you do it. You've got to look at the guy next to you, look into his eyes. Now I think you're gonna see a guy who will go that inch with you. You're gonna see a guy who will sacrifice himself for this team, because he knows when it comes down to it, you're gonna do the same for him.



That's a team, gentlemen. And either we heal, now, as a team, or we will die, as individuals. That's football, guys. 


That's all it is. Now, what are you going to do?
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To all my teachers at work and life who have taught me to hunt and love the game! Remembering you this moment! and a big thank you for everything...