Cramer: Golden price of oil needed to stay afloat

Jim Cramer had to give some credit to the markets on Wednesday. They finally started to make sense, and there was one move in particular with the price of oil that gave him a glimmer of hope.

When the price of oil turned up, suddenly it took the averages with it, which is how the Dow Jones went from being down 193 points before the reversal and finished up 183 points.

"Something really profound happened today. The stocks of the companies that were most on the ropes in the oil patch … led the rally, and that's actually a major positive," the "Mad Money" host said.





The oil storage depot at Indonesian oil company Pertamina in Jakarta
Beawiharta | Reuters
The oil storage depot at Indonesian oil company Pertamina in Jakarta
"If the price of crude could just stay between $35 and $40, many of these troubled oil companies can pull of the unthinkable and stay afloat" -Jim Cramer

Cramer has referred to companies like Chesapeake Energy and Freeport-McMoRan as "dead man drilling stocks," and he was shocked when they staged a big comeback Wednesday.

For ages, oil has dragged down the market because of the notion that the demand for crude has declined. However, in Cramer's perspective the fact is that demand for oil is increasing, not going down.

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And there are some major consequences to oil going down, even if it is due to a supply glut. Investors become worried that debt-laden oil companies won't have the cash flow necessary to cover their debt.

"But, and this is a big but, if the price of crude could just stay between $35 and $40, many of these troubled oil companies can pull of the unthinkable and stay afloat," Cramer said.

This could relieve one of the biggest stresses on the market right now.

Another good sign that Cramer saw for the oil patch is that the dollar has finally become weaker. Oil is priced in dollars, so if the dollar becomes weaker that means it will require more dollars to buy a barrel. As a result, the price of black gold is was able to rise.

A breath of fresh reality finally crept into the environment, too, when stocks of companies that should be negatively impacted by higher oil and gas prices went down. For a long time groups such as retailers and restaurants have fallen with the price of oil, which is unusual to Cramer because they benefit the most from lower oil prices.

"Maybe this market finally started taking its Lithium or Zyprexa or Abilify in order to tamp down on the lunacy?" Cramer asked.

In the end, Wednesday finally broke the ice as the day when the market was led no just by the price of oil. There was hope that the struggling oil companies will finally get to live another day.

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