Cantor Fitzgerald’s global chief market strategist said Monday that he is skeptical of the “dance” between Saudi Arabia and Russia over oil production and that a deal from OPEC and its allies would likely not be enough to save struggling United States energy companies.
“I’m really, frankly, not all that convinced that this is an all out fist-fight between Saudi Arabia and Russia. I think it might be a little bit more of a veiled attempt, frankly, by both of them to take a swipe at US E&P while US E&P has been shut out of the capital markets,” Peter Cecchini said on “Closing Bell.”
A virtual meeting between OPEC and its allies that was originally scheduled for Monday will now likely take place Thursday, sources told CNBC. The head of Russia’s sovereign wealth fund said a deal between his country and the Saudis was “very, very close.“
However, Cecchini said that a deal likely wouldn’t boost oil prices enough to prevent more defaults in the energy industry.
“I do, by the way, think on Thursday that we get some sort of deal that makes it look like there’s cooperation afoot. But let’s face it, with oil prices this low, for US E&P it doesn’t really matter that much,” Cecchini said.
Energy stocks have been crushed this year, with the SPDR S&P Exploration and Production ETF down about 60% in 2020. However, Cecchini said investors should not try to buy the stocks that appear cheap because of the risk of bankruptcies.
“I think it’s time to wait and see relative to who the survivors are in the space, and then wait and pick spots until after the damage has been done in full,” Cecchini said.