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Cramer: Oil Will Fall to $26/bbl, Saudi-Russia Output Freeze "A Total Hoax"
Echoing the sentiments of many critics, CNBC analyst Jim Cramer called the proposal by Saudi Arabia, Russia, Qatar, and Venezuela to freeze oil production "a total hoax" and warned that oil prices will plummet again, media reports.
In denouncing the Saudi-Russia proposal, Cramer remarked, "What they basically said was, 'We're going to produce a lot more if Iran and Iraq produce more'; the Saudis are taking direct aim at the United States."
He went on to observe that "Iran and Iraq are good for about 3.25-to-3.5 million barrels per day; both of these would love to get to 5 [million] as quickly as possible.
"Not only was there never any deal, but there was a deal that the Saudis could go up to 11 [million]."
Cramer also called traders who created an oil price rally based on rumours that Organization of the Petroleum Exporting Countries members would consider a production cut "fools" and said oil will drop back to $26 per barrel.
A more realistic assessment of the market, Cramer believes, is one in which U.S. crude will slip from 9.4 million barrels per day to only 8.7 million barrels this year and 8.4 million in 2017; this decline, along with Canada increasing production, amounts to only a net 800,000 barrel drop, which is "not what the Saudis want: they want to see a 50 percent drop because they're seeing a 50 percent capex cut number, like what you saw in Chesapeake."
Cramer is referring to Chesapeake Energy announcing the cut earlier this week in its earnings report.
Cramer concluded, "We're going nowhere fast in oil."
Earlier this month, Citibank described the price rally and those responsible for it as "bulls clutching at straws."
