Oil Stocks Point to $60 a Barrel

Will oil get to the $60s? This is where the major oil companies were when we hit that price last. Their stocks reflect that level.

Every time the oil stocks have dropped, they have foreshadowed the same commodity move. We simply have not found our footing in the actual oil price.

The question is, has worldwide demand slowed to the point where we could roll back to 2006 prices despite no new large finds of oil and tremendous growth, even if it is slowing, in places like China and India?

The answer is that that seems like a reasonable presumption, but that a certain point below $60 seems unrealistic.

That would make the oil companies buys right here, which seems reasonable.

Of course the problem with this theory is that the oil companies will open nowhere near here. They will open at levels that probably reflect oil in the $70s, which means they will be fairly valued.

These stocks also now trade like small-cap stocks because their dividends are either not trusted, as in the case of BP (BP - commentary - Cramer's Take), or are too small to matter, like Occidental (OXY - commentary - Cramer's Take) and Exxon Mobil (XOM - commentary - Cramer's Take), stuck below 3%. That's the reason I have been buying Chevron (CVX - commentary - Cramer's Take) all the way down, as it has a decent yield that should begin to cushion the decline.

The question we all face is, is it too late to buy, given where stocks were on Friday at 1 p.m.? I believe the answer is lies in the commodity. If you think the global financial plans can reflate the economy, then they are still cheap. If you think it is much ado about nothing or that the oil companies' profits are in such severe decline -- a total possibility -- then it isn't worth it.

I come out somewhere in the middle. If they open up big, there's really nothing to do. If they open up small, they have to be bought.

At the time of publication, Cramer was long Chevron. Editor's note: Jim Cramer will present his 2009 stock outlook for the first time at TheStreet.com Investment Conference on Saturday, Oct. 25. Click for details.

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