Should You Trust T. Boone Pickens?

Daniel Drew,  12/3/2014


T. Boone Pickens, the most well known oilman in America, told Jim Cramer on Mad Money that oil would be back above $100 in 12-18 months. Should you trust his forecast?

In August, at an investor conference in Dallas, Pickens said that Saudi Arabia needed oil prices to stay high to maintain its social spending programs, so it would reduce production to keep prices high. He said this when oil had dropped from $105 to $95. He admitted, "I've been surprised at the market and have actually taken a loss on Brent and North Sea crude."

Here is the the ultimate oil expert saying he was "surprised" when oil moved to $95. It recently hit $65. Yet we are supposed to believe him when he says oil is going back to $100 in 12-18 months. It might or it might not. The point is that this guy is a pro who didn't actually see the oil crash coming. It's like someone telling you to buy stocks in late 2008 when they didn't tell you in 2007 that the market would crash.

Pickens was wrong not only about the price but about the fundamentals. The Saudis did not cut production, and oil fell 10% on Thanksgiving. Now he's telling Cramer they will cut production eventually. Well that's no consolation for the oil traders whose turkeys were stuffed with oil on Thanksgiving.

The Saudis have outbluffed Mr. Pickens.