"We think oil is going to be lower for longer," TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, said to subscribers in a members-only call.
With crude oil trading around $38 per barrel, Cramer said it's too hard to like the energy sector. With oil prices near $40, that seems to be some sort of an equilibrium.
He explained that when oil falls below that mark, U.S. producers pull back on production. The lack of supply eventually drives the prices back up; when producers being to pump oil again, supply increases and prices retreat.
It's for that reason oil prices are having trouble staying north of $40 per barrel, he explained.
Given the commodity's big rally already, Cramer and Research Director Jack Mohr are hesitant to add more exposure to the energy sector for the Action Alerts PLUS portfolio. "This $40 level makes it so it's really difficult to invest in the group," Cramer said, adding, "We turned negative."
At the time of publication, Cramer's Action Alerts PLUS had a long position in OXY and SLB.