Dining at the Oil Trough

How high is oil going to go? How strong will the comeback be?

Given that rig count has been cut literally in half, given that prices for natural gas are at multiyear lows, the answer is that the rebound must be spectacular -- or at least spectacular to sustain these jet propulsions.

Transocean (RIG - commentary - Cramer's Take) and Schlumberger (SLB - commentary - Cramer's Take) are cases in point. These were the first to sell off on swine flu given that we were supposed to see worldwide demand of oil crimped by it -- or at least that was the talk of some commodity pundits.

Of course, that means hedge funds shorted them and the Oil Service HOLDRs (OIH - commentary - Cramer's Take) as natural plays on this epidemic even as it seemed pretty extraneous -- which is why I pushed the integrated oils so hard here and on my show. Also, I have been a big believer in Schlumberger as a cost-cut play.

But when you see companies like Halliburton (HAL - commentary - Cramer's Take), a nat gas play, or Transocean, a deep water play, trading higher, and when you see the natural has stocks trade up so well, I am now convinced that we are betting the trough is here.

They also could be saying war, most likely with Iran, but I don't know enough to make that judgment. Either way, I am not fighting this one any more, not after the horrific Chevron (CVX - commentary - Cramer's Take) quarter that produced no selling and the so-called technical breakout of crude.

We are in oil heaven. The group is rolling. And it can only be a sign that oil's about to go up more than expected -- I thought we were range-bound at $45 to $55. Drilling budgets will be renewed and grow larger, and nat gas - particularly Dow Chemical (DOW - commentary - Cramer's Take) or International Paper (IP - commentary - Cramer's Take) -- should be locked in for years at these prices because they aren't going to stay here much longer.

At the time of publication, Cramer was long Chevron.

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Jim Cramer is co-founder and chairman 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. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.