The drop in oil prices hit the club’s three energy holdings. But with uncertainty over OPEC+ production policy ahead of this weekend’s key meeting, along with growing concerns about the health of the global economy, we’re firmly sitting on buying the dip — at least for now. The Organization of the Petroleum Exporting Countries and its oil-producing allies, collectively known as OPEC+, will meet on Sunday to discuss their next course of action on output. But the strategy is unclear so far, given mixed messages from Saudi Arabia — OPEC’s de facto leader — and Russia, the largest member of the producer partnership. Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, last week warned investors betting on a drop in oil prices to “watch out”, alluding to a major surprise OPEC+ output cut in early April and a subsequent spike in oil in the near term. A few days later, Russian Deputy Prime Minister Alexander Novak minimized the need for further action by OPEC+. In general, a decision to cut production would be seen as an attempt to raise prices. Brent crude — the global oil benchmark — and West Texas Intermediate Crude, the U.S. crude benchmark, have fallen about 7% and 8% over the past week, respectively. Over the same period, the club’s three oil names — Coterra Energy ( CTRA ), Pioneer Natural Resources ( PXD ) and Halliburton ( HAL ) — fell 9.8%, 6.8% and 6.3%, respectively. @CL.1 5D mountain West Texas Oil prices for the last five days. Conflicting signals from OPEC+ rattled an oil market already grappling with multiple price drags, including resilient Russian oil output in the face of Western sanctions and concerns that China’s economic recovery from Covid-19 restrictions has not been as strong as expected. to Cowen energy analyst Jason Gabelman. “There’s also a lot of concern in the U.S. and Europe about a freight recession and just a broader slowdown in demand,” he told CNBC, adding that an increased number of investors are poised to profit if oil prices weaken. Given the mixed commentary, Gabelman said the market may be expecting OPEC+ to make a “very modest” output cut on Sunday, “or a cut in name only … where some of the unofficial cuts become formal.” In those cases, Gabelman said he thinks oil prices are unlikely to react significantly. “If they don’t continue to cut, there could be another backlash immediately afterward,” Gabelman said. But he cautioned that the downward move may not last through the US summer months, a seasonally strong period for demand. In short, we view the situation ahead of the OPEC+ meeting as too cloudy to make a move on our oil stocks, despite their recent swoons. Our investment style is usually to try to buy high-quality companies when they fall out of favor – but it’s too early to do the same for oil, given the economic cross-currents and uncertainty surrounding Sunday’s OPEC+ decision. We are willing to be patient with these positions – especially as companies continue to implement robust capital return programs – and wait until we have better ground. (Jim Cramer’s Charitable Trust is long PXD, HAL, and CTRA. See the full list of stocks here .) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive trade alerts before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling shares in his charitable trust’s portfolio. If Jim was talking about stocks on CNBC TV, he waits 72 hours after the trade alert is issued before he executes the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND PRIVACY POLICY ALONG WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION SHALL EXIST OR CREATE BY YOUR ACCEPTANCE OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO PARTICULAR RESULT OR PROFIT IS GUARANTEED.
An Austrian soldier guards the entrance to OPEC headquarters on Oct. 4, 2022, on the eve of the 45th meeting of the Joint Ministerial Monitoring Committee and the 33rd meeting of OPEC and non-OPEC ministers, held Oct. 5 in Vienna, Austria.
Joe Klamar | AFP | Getty Images
The drop in oil prices hit the club’s three energy holdings. But with uncertainty over OPEC+ production policy ahead of this weekend’s key meeting, along with growing concerns about the health of the global economy, we’re firmly sitting on buying the dip — at least for now.