Investors expected to sell oil stocks on any rumors of OPEC deal

Investors with stakes in oil and gas companies should unload their positions at any sign of a breakthrough in talks between OPEC and its allies, CNBC’s Jim Cramer said Monday.

“If there’s some kind of rumor that the Saudis and the Russians have a new deal to save OPEC and restore the old order, I think you’re using it as a chance to sell,” he said. host of “Mad Money”. “If you need money, sell by all means [Tuesday] if it’s an oil company with a terrible track record like Occidental.”

Cramer, who has become a critic of oil and gas shareholding, made the recommendation after crude prices saw their biggest one-day drop in nearly three decades. U.S. West Texas Intermediate crude fell 25% to below $31 and international benchmark Brent crude plunged 26% to below $34, suffering their worst day since 1991.

The crude sell-off, which began last week after OPEC members failed to agree oil production cuts with allies, has taken oil prices to lows levels since February 2016. Wall Street participants fear that the failure of the talks could lead to an oil price war. These concerns, coupled with ongoing worries about the fast-spreading coronavirus, led to a sharp decline in major stock averages.

Cramer thinks oil and gas stocks are no longer investable, largely due to green investing trends among younger generations.

“The problem is that when lots of fund managers refuse to own your stocks, those stocks go down,” Cramer said. “Now, however, we have a much more serious and drastic reason to sell them: the sudden collapse of crude as Saudi Arabia and Russia engage in this vicious price war.”

OPEC and its allies are called an OPEC+ collective. OPEC is made up of 14 countries and led by Saudi Arabia. The group of non-OPEC allies is led by Russia, which on Friday rejected a proposal by the 14-member cartel to cut crude production by 1.5 million barrels a day from April.

Saudi Arabia responded on Saturday by saying it would cut oil prices in coming months, alongside reports that the oil-dependent country could increase production from 9.7 million barrels a day to 10 million.

Occidental, which handed out $38 billion and took on billions more in debt when it bought Anadarko Petroleum last year, lost half its value in the session. The stock fell to $12.51 per share on the market-wide sell-off.

Cramer singled out the company for the 25% dividend it pays, declaring it unsafe.

“There’s a reason the stock lost more than half its value today. I begged the CEO of this company – begged – not to buy Anadarko, but she did anyway “, said the host. “Now I’m begging you not to buy Occidental.”

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Felix J. Dixon