There Is Not an Excess Supply of Oil

Yeah, yeah, the oil speculators ratcheted up oil. That's why it is going up.

Once again we heard that we were knee-deep in oil, and that oil stocks should be sold left and right. Once again we heard that the oil stocks were "finished" and you couldn't touch them.

And then some meaningless small-time pipeline gets blown out and the stocks ramp and the crude ramps and the stocks fly.

And they go up faster and further because people are short them on the mistaken belief that there is excess supply and the companies were buying stock the whole way down -- particularly Conoco (COP - commentary - Cramer's Take) and Chevron (CVX - commentary - Cramer's Take) -- so there is a slightly tighter supply.

Believe me, if we were swimming in oil, this pipeline wouldn't be noticed. We are supply-constrained at all times because of real demand, not speculators.

In fact, a friend of mine at the Singapore Energy Conference talked to the chief economist at the Saudi British Bank in Riyadh, and tells me he says that spare capacity is only about 2 million barrels a day and that the idea of being able to say that it can meet Asia's growing energy demands is just for show. They just don't have enough to go around over there and that's the truth that we'd all better start realizing. It isn't U.S. demand that drives this stuff, it is Asia's, and that's only going to get worse, not better.

My suggestion: Go back to the majors and the drillers, especially Halliburton (HAL - commentary - Cramer's Take) and Transocean (RIG - commentary - Cramer's Take), but I would not forget Core Labs (CLB - commentary - Cramer's Take) which has really been clocked and seems ready to ramp right back. Oil Service HOLDRs (OIH - commentary - Cramer's Take) for the uncreative.

And big money will be made once again.

Random musings: I see where TheStreet.com Ratings downgraded Discovery (DISCA - commentary - Cramer's Take) Wednesday. For the record, this is one of my very favorite stocks that I talked up on "Mad Money" right on top of Oprah's planet earth DVD recommendation. Discovery's on a roll, special proprietary programming is so important and this company is better-run than ever. That's because David Zaslov, who worked with me at NBC, now captains the ship and is best in show.

At the time of publication, Cramer was long ConocoPhillips, Transocean and TheStreet.com.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. Click here to order Cramer's latest book, "Mad Money: Watch TV, Get Rich," click here to order his book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

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