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"If oil can't mount a major advance on some insane Middle East friction, real tension among the Gulf States that export 30 percent of the world's crude oil to starved markets, what is it going to take for black gold to really roar higher? " the "Mad Money " host asked.
While the oil bulls may be questioning their logic, Cramer said the answer lies in a Schlumberger conference call from when it reported its first-quarter results in April: oil will rise when the deep-water oil wells start to run dry.
The "Mad Money" host explained that oilfield service companies like Schlumberger, the world's largest, know the most about crude's supply and demand.
Watch the full segment here:
"It was the first to lay off people because it saw the downturn in crude coming, and it's been the last holdout against the oil bulls, effectively just saying there is no bottom coming in 2017," Cramer said of the company.
Since that conference call, Schlumberger's stock price declined roughly $5 because management refused to call bottom, unlike most others in the industry.
But it was because the deep-water wells, which can produce 20 times more oil than one good shale prospect, are in stellar shape and pumping away, keeping worldwide inventory close to capacity.
U.S. producers, especially those with large offshore wells, are not stemming production either. Wells established after the 2010 Macondo spill, mainly by energy giant Chevron, will hit all-time peak production this year at over 1.9 million barrels a day, 300,000 more per day than in 2016.
So while oil industry spectators may think production cuts may be in store, the opposite is happening as rig counts rise, with last week marking the 20th straight week of additions.
"Now, the one thing that's in the oil bulls' favor, and Schlumberger has been telling people this, is that most new deep-water projects around the world have stopped" since 2015, Cramer said. "That's a chief reason why Schlumberger's earnings have been so, I'd say, sub-par versus, say, Halliburton, which gets much more of its business from servicing on-shore drilling. "
Cramer said that prices will only tighten when the older deep-water wells start seeing decline rates. Only then will supply come into question, he explained.
For now, oil's prospects are in the hands of speculators, particularly financial managers, until oil heads down to $43, five dollars below where it is now, which Cramer says will cause liquidation.
That means oil's boom and bust cycle is in the hands of traders, not oil producers and consumers, which means that regardless of demand, oil securities will be tossed back and forth between hedge funds' hands, Cramer said.
"I know it's a subdued forecast, out of sync with all the self-serving oil bulls in the industry who come on all the time and talk. But it's from the best of the best, Schlumberger, and remember, it's distinctly against their interests to say these negative things," the "Mad Money" host said. "To me, it's all that matters, and it means that today's little oil rally is another move that should be faded by Friday when the Baker Hughes rig count number comes out and likely sends us right back to where we started from, if not lower this time around."
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