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Cramer Says To Sell Oil Stocks If Saudi Arabia, Russia Reconcile

Oil stocks could rebound if Saudi Arabia and Russia resolve their differences and "save OPEC," and investors should take advantage of any near-term gains by selling their position, according to Jim Cramer.

Benzinga · 03/10/2020 20:27

Oil stocks could rebound if Saudi Arabia and Russia resolve their differences and "save OPEC," and investors should take advantage of any near-term gains by selling their position, according to Jim Cramer.

Cramer Advises Selling Oil Names With 'Terrible Balance Sheets'

Saudi Arabia and Russia's public fallout could be rectified, a move that would support oil prices and "reinstate the old order," Cramer said on Monday's "Mad Money."

The top priority for investors would be to sell their oil on an OPEC-themed rebound, the CNBC host said.

Investors who need cash right away and are looking to sell oil names should start with companies that have "a terrible balance sheet," like Occidental Petroleum Corporation (NYSE: OXY), he said. 

Occidental's stock was particularly hit hard Monday, and its 25% dividend yield is unsafe, Cramer said.

The company made a big mistake in buying Anadarko, a "decent" producer at best, for $55 billion, he said.

Citing data from Cramer's most trusted oil expert, RBN Energy's Rusty Braziel, Cramer said Occidental has a $30-per-barrel find and development cost and a $34 per barrel lifting cost — making it the "third-worst" among the 37 U.S. producers Braziel follows.

"I begged this company's CEO — begged — not to buy Anadarko, but she did it anyway," Cramer said. "Now, I'm begging you not to buy Occidental."

Cramer Expects Bankruptcies 

Oil and gas stocks should be avoided, in part due to a generational shift as new investors demand exposure to green technologies and themes, Cramer said.

The bigger picture and more dominant headwind facing the industry is the "sudden collapse" in oil prices as Saudi Arabia and Russia enter a "vicious price war," he said. 

Some "good" American shale companies can not only survive the price war but thrive in it, Cramer said — but added that there are "many" bad companies, and investors should expect to see bankruptcies. 

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Riyadh photo via Pixabay.