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Cramer: Ridiculous game oil producers play to manipulate prices

The ridiculous linkage between the price of oil and the stock market has Jim Cramer's head spinning. He has detected a pattern of oil pricing and does not think it is a coincidence.

The pattern is simple. Every time oil falls to the low $40s, a rumor surfaces from oil producers that a production freeze is about to happen.

"This kind of rumor-mongering still does exactly what the world's oil ministers want. It's incredible, it's ridiculous, but it works every time," the "Mad Money" host said.

Cramer watched as the rumors played out on Monday, after the price of oil was hammered last week. Prices fell, and sure enough, the oil ministers played their part to send it back up.





Mohamed Hamel, chairman of OPEC, left, Mohammed Al-Sada, Qatar's minister of energy and industry and president of OPEC, center, and Abdalla El-Badri, acting secretary general of OPEC, look on ahead of the 169th Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Thursday, June 2, 2016.
Akos Stiller | Bloomberg | Getty Images
Mohamed Hamel, chairman of OPEC, left, Mohammed Al-Sada, Qatar's minister of energy and industry and president of OPEC, center, and Abdalla El-Badri, acting secretary general of OPEC, look on ahead of the 169th Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Thursday, June 2, 2016.
"This kind of rumor-mongering still does exactly what the world's oil ministers want. It's incredible, it's ridiculous, but it works every time." -Jim Cramer

A story from Reuters confirmed Cramer's theory on Monday. The headline read, "Venezuela says OPEC, non-OPEC oil stabilizing deal close." It stated that Venezuelan President Nicolas Maduro said OPEC and non-OPEC were close to reaching a deal to stabilize oil markets later in the month.

That's the key, Cramer said. The rumors always include a statement from someone who needs oil to go higher. It made sense to him that the story would have a statement from Maduro, as Venezuela has struggled immensely from falling oil prices.

The next step in the rumor-mill process is to get a call-to-action from someone else with credibility. Sure enough, OPEC Secretary General Mohammed Barkindo was quoted saying that OPEC members may call a meeting to discuss oil prices if they reach a consensus at an informal gathering in Algiers.

Additionally, the article stated that Iranian President Hassan Rouhani, who also desperately needs the price of oil to go higher, made it clear that Tehran supports a move to stabilize the global oil market and raise prices.

The story also included a venue for the meeting, with OPEC members slated to meet at the International Energy Forum that takes place Sep. 26 to Sept. 28.

With Venezuela, Iran and the head of OPEC on the record saying it wants something good to happen to oil prices, the only piece left was to get the opinion of a non-OPEC member to join the rumor. The article also stated that non-OPEC producer Russia would attend the forum.

Voila, the price of oil climbed on Monday.

Ultimately, the rally did reverse to undo what started as a strong day. Cramer wanted to know why the kneejerk rally still happens.

"Simple, the nations involved all want oil to go higher, but they don't want to cut back production and then risk losing market share to the United States, which is ready to take advantage of any production freeze that raises prices," Cramer said.

This is the sixth time the game has been played this year, according to Cramer.

The pattern usually works, too, until an event like an oil inventory number or an OPEC meeting with no result occurs.


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