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Jim Cramer Calls the Bottom in Oil

A Bottom for Oil Is Finally at Hand
By Jim Cramer

11/18/2008 8:48 AM EST

For weeks I watched the oils go and said over and over here that Chevron (CVX) and Exxon (XOM) and BP (BP) and Marathon (MRO) and Oxy (OXY) were priced for $60 oil. Great call.

Except I said it as a defense to own them, that they were overdone. They were exactly right. The stocks correctly foresaw this morass. Now the stocks are struggling to go lower.

Exxon is saying we are done going down. So is Chevron. That doesn't mean it is ready to go up. That's the old days. But I am conscious that the rate of decline may have decelerated so that $40 oil may not be in the cards.

If that's the case, two you should consider: BP and Anadarko (APC) . The former had a fantastic quarter by all measures. It has the best dividend and should have no problem paying it.

The Russians look like they are fed up with crushing investing; that can help. The stock's looking stable. Anadarko is more of a play on the ultimate comeback of natural gas and a company that is smart enough to have hedged in much higher prices — it never believed the $13 price could stick — for a long time, and it has no problem paying the debt it took on to buy oil and gas properties pretty much at this price.

Jim Hackett came on my show last night and said something very interesting, that the majors should wake up and realize that all of the stocks have fallen too far. He said he was buying back stock and did so intensely when the stock was even lower because of a simple reason: His company was priced at $10 a barrel and he could not drill for oil at those prices.

Why not stand there and buy rather than spend a lot of money to drill at very high prices, he asked. He predicts a tremendous consolidation in the industry. He says there is no way that the majors can resist.

This may be a group that is putting in a bottom. The charts aren't all that bad. The weather is cold. The seasonality is right. Every rally keys on Exxon.

I think that, at last, there is some safety in oil.