Friday, July 07, 2006

Oil destined for $100, expert says
Bull market for commodities has another 15 years, with bird flu only hope of break.
July 6 2006: 9:46 AM EDT

LONDON (Reuters) -- Oil prices will soar to well over $100 a barrel and stay high as part of a sustained commodities bull run that has another 15 years of life, billionaire U.S. investor Jim Rogers told Reuters in an interview.

One factor that could bring down the price would be a bird flu epidemic, which would send all asset classes plummeting, he said, although oil would probably fall less than other markets.

"We're going to have high oil prices for a very long time. The surprise is going to be how high it goes," Rogers said.

Reiterating earlier comments that oil prices would hit at least $100 a barrel, he said: "It will be much more than $100 before the bull market is over."

U.S. light sweet crude hit a new record of $75.40 a barrel Wednesday and was trading at close to $75 Thursday.

Rogers, a former investment partner of billionaire fund manager George Soros, has predicted the commodities bull run has at least 15 years to run.

"It's a major long-term bull market as far as I'm concerned," he said.

Aside from the bullish impact of tensions, described by Rogers as temporary, over Iran's nuclear ambitions and North Korea's missile tests, he said oil was drawing long-term support from the lack of large-scale finds.

He did not know whether the Peak Oil theory that oil supplies are either at or very near their peak was correct.

But said: "If there is oil out there, you had better find it soon."

Bird flu would lower prices
Apart from new supplies, a factor that could lower prices would be a widespread epidemic of bird flu spread between humans.

"If bird flu should break out, everything will go down and oil would go down to $40, but I would still urge people to buy oil. It would go down less than other things and it would be the first to go back up," said Rogers.

Rogers has set up the Rogers International Commodity Index (RICI) for gaining access to the commodity markets.

In the first half of this year it outperformed its much bigger rivals the Goldman Sachs Commodity Index (GSCI) and the Dow Jones-AIG Commodity Index (DJ-AIGCI).

While the RICI gained 9.7 percent in the first six months of this year, according to Reuters data, the GSCI rose 5.3 percent and the DJ-AIG gained 3.6 percent.

Rogers said he could not say exactly how much money was in the RICI, but it was at least $4 billion.

The commodity indexes, which analysts have estimated bring together a total of well over $80 billion, each comprise different combinations of commodities.

The GSCI and DJ-AIGIC adjust the weightings of various components depending on market performance, while the Rogers index maintains steady weightings, Rogers said.

"You need the same weightings every month," he argued.

Among those using the indexes are the mutual funds, which invest in groups of assets on behalf of individuals and institutions.

As an indication of how much room the commodities market, long regarded as a very risky, alternative investment, has to grow, Rogers said there were around 70,000 mutual funds for investing in stocks and bonds and less than 10 to invest in commodities.

"People have started to invest in commodities. It's a bull market and bull markets pick people up as they go higher and higher," he said.