Archive for July, 2008

2008 GDP for the GCC is set to surpass $1T (+36% yoy) along with an impressive doubling of cement capacity by 2010, not to mention similar increases expected in petrochemicals, natural gas and other industries. Economic and investment boom time indeed. Although on the flip side, inflationary pressures will continue to persist. Dollar depeg doldrums…

clipped from archive.gulfnews.com Oil revenue of Gulf Cooperation Council (GCC) members is likely to cross $600 billion in 2008, prolonging the economic and investment boom in the region for the medium term, according to a report by Gulf Finance House.

At an estimated production cost of $2.00 per barrel, Saudi Aramco’s annual net revenues are expected to top an eye-popping $200 billion.  The world’s largest oil producer has also set its sights on becoming a leading petrochemical manufacturer, where a single barrel used in production yields an “output” valued at $500.  The company is run by Stanford-educated, Nabilah Al-Tunisi.  Dubbed the ‘Iron Lady,’ she is easily the most powerful oil executive in the country, if not the region.  For the complete story, see Forbes The Other Face of Saudi Aramco.

This is not the first time a prominent figure from OPEC has publicly commented on high oil — emphasis this time around on geopolitical pressures. (See clip excerpt below.) Obviously the weak dollar and speculators have been major factors as well. Interesting times ahead as the geopolitical chain will be yanked again, although against contracting demand and stabilizing supply. The “smart money” is likely largely short and it’s only a matter of time for downward revisions of overambitious oil price targets.

clipped from money.cnn.com Oil skids about $3 on OPEC comments Cartel president says there is adequate supply and prices are much too high. NEW YORK (CNNMoney.com) — Oil prices briefly fell below $121 a barrel on a big slide Tuesday after OPEC’s president said crude prices were abnormally high and many investors continued to bet that the fundamentals of the market will push oil down. “If the dollar continues to strengthen and the political situation [with Iran] improves, then the long-term prices will be about 78 dollars (a barrel),” said Khelil, according to reports.

Mr. Mukhtar Hussain, HSBC global CEO for the Middle East and North Africa, forsees significant and sustained growth in Islamic financial services driven by public spending on infrastructure, estimated by one account at a staggering $2.1 trillion.  See Financial Times article.

American fast food icon McDonald’s reports almost 9% (8.8%) gains in its Asia Pacific, Middle East, and Africa stores, leading the produce-consuming giant to analyst-trumping gains in the second quarter of 2008. At a time when US market volatility confounds the efforts of some of America’s best multinational competitors, McDonald’s posted net profits of $1.2B vs. a loss of about $712M in the same quarter the preceding year, reports BBC News (7/23). Look for continued consumption of the inputs McDonald’s loves for Q3 2008, but keep in mind what Forbes reports as a potential commodity increase and squeeze on McDonald’s profits down the road. We’ll be watching this closely.

General Electric shares may have short circuited after the company’s surprising earnings miss earlier this year. HOWEVER, Mr. Immelt clearly has his eyes set on high growth and Abu Dhabi’s investment arm is showing unequivocal support of its partner in declaring its intention to become a top-10 shareholder. Read the rest of this entry »

Investors from Europe and the US seeking to increase their exposure in the Gulf region helped boost sales of Islamic bonds to $17 billion at the end of June, representing a 17 perecent increase over the previous year.  Fueled by soaring oil prices, the cash rich region is seen by many as a low-risk alternative to the credit-stressed markets of the West.  See article in Financial Times (7/22).

Australia’s largest department store, Myer, will be opening its first overseas stores in Dubai in 2009 before opening another four stores in the UAE, reports the Sydney Morning Herald (7/21). “Three of the 10 largest shopping malls in the world are in Dubai, and retail is expected to surge by 12 per cent through until 2011 in the UAE, but at an even faster rate in Dubai,” claims Myer’s chief executive.

Despite robust growth that has seen collective US net worth rise from $3.4 trillion in 1970 to a current level of $56 trillion, the price of a single barrel of oil has dramatically exploded during the same period from $3.18 to $140.00.  The net worth of America, as measured in oil, has actually declined from 1.1 trillion barrels in 1970 to a modest 400 billion barrels today.  See Scott Burns column in MSN Money (7/16).

The emirate continues its broad expansion into the global airlines market as strong petroleum prices boost its purchasing power. In all, $25B was laid down for major orders for the ME as the region continues to grow its network of airway carriers. See the Reuters report (7/14).