While oil has again been plunging, commodities guru Jim Rogers says he wouldn’t start buying oil – yet.
“I would not buy oil,” Rogers tells ETF.com. “It’s pretty clear to me that oil is going to go down to test the previous lows, and it might even go under a little bit to scare people. I wouldn’t buy gold either. I’d rather buy agriculture if I were buying commodities at this stage.”
“The way most markets work is once you have a big collapse in something and it hits a low, there’s a second test of the lows,” Rogers added. “Right now you’re getting that second test in oil. I suspect that it will pass the test, or at the worst, maybe make a minor new low.”
Rogers says China’s problems are one big reason behind the oil declines. Another is America’s negotiations with Iran. “America went to Saudi Arabia and told them to dump oil to put pressure on Iran and the Russians,” Rogers said. “Saudi Arabia was happy to do it because they also wanted to slow down fracking in the U.S. You had this artificial geopolitical event, which drove the price in oil down. If you get out the charts, you can see the drop almost exactly coincided with American negotiations with Iran.”
While he thinks oil will go lower, Rogers sounds bullish on oil for the longer term. “The world has been using more oil than it discovers for the past several years,” he said. “Worldwide reserves are in decline, except for fracking, of course. This downturn will be temporary, in my view.”