INTERVIEW: Oil, other commodities have reasons to hold up in big election year - Jim Rogers

Commodity markets are witnessing many reasons for oil to remain a favorite among investors in the near term as declining reserves, slow pace of energy transition, as well as anticipation of favorable policies following elections in India and the US are adding up to create opportunities, according to one of the world's leading commodity investors, Jim Rogers.

Rogers, chairman of Beeland Interests, Inc. and co-founder of the Quantum Fund with George Soros, added that while China's economic woes had hit bottom and could only rise from there, India, South Korea and Japan will offer robust opportunities for oil and overall commodity markets.

"The world has not been discovering a lot more oil. There are substitutes coming but the substitutes take a long time and they are not coming fast enough," he told S&P Global Commodity Insights in an exclusive interview.

"So if I owned oil, I would not sell oil. And if I did not own oil, I would look for opportunities to buy. Because there are many things that can help oil to stay strong in 2024 and 2025," Rogers, who also founded the Rogers International Commodities Index, said.

From the beginning of 2023 to the end of March, Platts Dated Brent averaged $83/b, the same level for 2023 as a whole. Based on an analysis of market fundamentals and sentiment along with other factors, S&P Global Commodity Insights expected Platts Dated Brent to average $85/b in 2024 in its base-case forecast. It is expected to moderate and average around $79/b in 2025.

Key election year

Rogers added that as central banks and governments across the globe printed staggering amounts of money, this would support commodity prices in the foreseeable future.

"Since there has been a lot of money printing in the world, demand for commodities should be strong. So, if you own some sugar, don't sell it. I wouldn't sell my oil either. If you own some silver, don't sell it," Rogers added.

He added that elections in India and the US might yield results that would ultimately support commodity markets.

"The Indian economy is doing well and the stock market is at an all-time high. If there is policy continuity and Narendra Modi, assuming he gets elected again, does what he says about opening up the economy India has reasons to replicate some of the success stories of China. For instance, agriculture provides a great opportunity," Rogers said.

"New Delhi understands there's a need to open up further. That's good for the economy and good for oil too," he added.

Rogers added that a Donald Trump win in the US would be relatively more favorable for commodity markets compared with a Joe Biden win. "Market players know Trump would not ruin commodity markets."

Asian economic outlook

Rogers said although the worst for the Chinese might be over, recovery would be at a relatively slower pace.

"When such as property bubble pops, that too in a place like China, it takes a long time. While the Chinese economy has been bumping along at the bottom, I don't think it's going to get worse but it's not going to turn around and go up," Rogers added.

"As the Chinese economy makes its bottom it will cause demand for many commodities to also bottom. I would suspect we will see higher prices because of China for most commodities for the next couple of years," he added.

According to S&P Global Ratings, the global economy is set for broadly steady expansion in 2024 in the backdrop of resilient labor markets and ongoing gradual disinflation. It has forecasted global growth of 3.2% in 2024 following a 3.4% expansion in 2023, while it expects the global economy to expand at 3.3% in 2025, with monetary policy easing and normalizing economic activity.

In China, S&P Global Ratings expects growth of 4.6% this year on the back of ongoing softness in the property sector and modest policy support. Growth in the whole of Asia will ease to 4.4% in 2024 from 4.8% in 2023 before recovering to 4.6% in 2025.

Rogers said there were positive signs emerging in South Korea for commodity investments, while Japan's policies had helped to stabilize the economy.

"South Korea is learning they should become more of an international economy and become more open and receptive to the outside world. I do see positive changes that are taking place," Rogers said.

"Japan has been printing and spending a lot of money in recent years. Debt goes up every day because of a lot of money printing, but markets are doing well and the economy is not getting worse either," he added.

Cause for concerns

Commenting on the Russia-Ukraine and Middle East conflicts, Rogers said wars traditionally supported commodity prices, although long-drawn conflicts could have negative repercussions.

"For instance, Ukraine and Russia produce agriculture and oil and there are supply constraints in those two countries now. The other risk of course is if there's a conflict in Asia -- Taiwan for instance. We should then be all very worried," Rogers added.

He added that there was a need to watch not just commodity investments but overall financial investments carefully and look cautiously into the future.

"The US stock market has been going up since 2009 -- that's the longest in American history without a problem. I see signs of inflation coming back and there are possibilities of interest rate increases. I also see a lot of speculation -- there are lots of new investors who are telling their friends that this is easy money. That's a worry." Rogers said.

He added that mounting debt in the global economy is a big concern now.

"When we have the next bear market, it will be very bad. The 2008 one was bad because of too much of debt. Since that time debt has skyrocketed. Even China has a lot of debt now. They did not have much debt 25 years ago," he added.