Investors with holdings in oil and gas companies should offload their positions on any sign of a breakthrough in discussions between OPEC and its allies, CNBC’s Jim Cramer said Monday.
“If there’s any kind of rumor that the Saudis and the Russians have a new deal to save OPEC and reinstate the old order, I think you use that as a chance to sell,” the “Mad Money” host said. “If you need the money, by all means sell [Tuesday] if it’s an oil company with a terrible balance sheet like Occidental.”
Cramer, who has emerged as a critic of oil and gas stock ownership, made the recommendation after crude prices experienced their steepest one-day decline in nearly three decades. U.S. West Texas Intermediate crude dropped 25% to less than $31 and international benchmark Brent crude plunged 26% to fall under $34, suffering their worst day since 1991.
The sell-off in crude, which began last week after OPEC members failed to agree on oil production cuts with its allies, brought oil prices to their lowest levels since Feb. 2016. Wall Street participants worry that the failed talks could lead to an oil price war. Those anxieties, coupled with ongoing concerns about the fast-spreading coronavirus, led to a severe dip in the major stock averages.
Cramer thinks oil and gas stocks are no longer investible largely in part due to eco-friendly investing trends among younger generations.
“The issue is that when lots of money managers refuse to own your stocks, those stocks go lower,” Cramer said. “Now, though, we’ve got a much more serious, draconian reason to sell them: the sudden collapse in crude as Saudi Arabia and Russia engage in this vicious price war.”
OPEC and its allies are referred to as a collective as OPEC+. OPEC is made up of 14 nations and led by Saudi Arabia. The non-OPEC group of allies is led by Russia, who on Friday rejected a proposal by the 14-member cartel on Friday to cut crude production by 1.5 million barrels per day beginning in April.
Saudi Arabia responded on Saturday by saying it would reduce its oil prices next months, alongside reports that the oil-dependent country may boost production from 9.7 million barrels per day to 10 million.
Occidental, who dished out $38 billion plus taking on billions more in debt in a takeover of Anadarko Petroleum last year, lost half its value during the session. The stock dropped to $12.51 per share during the market-wide sell-off.
Cramer singled the company out for the 25% dividend it yields, declaring it unsafe.
“There’s a reason the stock lost more than half of its value today. I begged this company’s CEO — begged — not to buy Anadarko, but she did it anyway,” the host said. “Now, I’m begging you not to buy Occidental.”