Make Room for Eventual Oil Investment

I am hearing rumblings about how we could be near an exquisite moment to buy the oil stocks. We are near the end of the quarter, many of them are purged from portfolios and oil seems to have bounced off of $60 fairly well.

It's quite tempting to believe that this week we will find a bottom. I have said that I want to be back at $56 a barrel, and I don't want to change that view, but by week's end, if you have any faith whatsoever that these stocks could come back, you need to do a little buying particularly in the incredibly hard-hit service sector.

What's the thesis? Unlike with the other commodities we still don't have more oil. We've found some, but not enough. We will be using more gasoline at these prices and not all the refineries can run full-out much longer.

More important, though, is there is some price that can be considered China- and India-demand related not terror related.

Here it is important to distinguish natural gas from oil. Natural gas is back to where it was two years ago. Using Occidental Petroleum (OXY - commentary - Cramer's Take) as our proxy for both oil and natural gas, you can bet that Oxy should have given up much of its natural gas gain, but its oil gain should be still substantial.

It was at $26 when natural gas was this low, so that's a tug down. It was at $35 when oil was in the $50s. So, I can still argue that this stock belongs lower than $45. But should it be at $35 with oil up from where it was but natural gas down? I would argue that somewhere between $35 and $45 lies the right price. I believe we will see it.

Looking at a largely natural gas company, however, like a Cimarex Energy (XEC - commentary - Cramer's Take), this one needs to go down 6 points to where it is cheap enough. On a $34 stock, that's not good news.

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