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Cramer: What stands between $50 oil going to $60

With both oil inventories falling and natural gas running hot, Jim Cramer was taken aback by the staggering moves in energy in the past few months. Suddenly oil is trading above $50 and gas is approaching $2.50.

Do they make sense?

"Yes, even as this new level of pricing is more bullish than I thought possible, and I was a pretty lonely bull back when oil traded in the $30s," the "Mad Money" host said.

Cramer attributed the rally to the shortfalls of the big Canadian oil shutdown caused by wildfires, and a pickup in gasoline consumption from driving more. Third, the dreaded increase in oil drilling that many expected would happen when crude tipped $50 hasn't happened.

More important, are the severe supply constraints occurring in both Libya and Nigeria. Chinese production has also fallen hard, even as Chinese auto purchases have increased. Autos represent one-third of all the oil use in China.





A woman pumps gas at the Victory gas station in Pembroke Pines, Florida.
Getty Images
A woman pumps gas at the Victory gas station in Pembroke Pines, Florida.
"Watch the rig count, though. That is what stands between $50 and $60 oil." -Jim Cramer

It is the combination of better demand in the U.S. and China, and dwindling supply that has driven crude higher. That is, until the U.S. begins to produce more oil.

As for natural gas, Cramer attributed the move to the weather. The rally has given natural gas producers like Cabot, Range Resources and Chesapeake a chance to keep their head above water. There has also been a steep decline in coal as a fuel around the world.

Cramer knows that stocks like Freeport-McMoRan, Chesapeake Energy, Halliburton, National Oilwell Varco and Dover look pretty attractive right now.

"All of these stocks represent bargains if oil goes to $60 and natural gas climbs to $3," Cramer said.

Ultimately, the fuel rally makes sense to Cramer, as higher demand and falling supply is generating better pricing.

"Watch the rig count, though. That is what stands between $50 and $60 oil, and right here all of these reach stocks need crude to rally to the upper extreme to justify their moves," Cramer said.

Otherwise, it may be best to stay with the stronger names.

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