NEW YORK (TheStreet) -- When it comes to commodity pricing, and specifically oil prices, investors need to remember one simple concept: supply and demand.
TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, says energy professional Boone Pickens reasoned that the weakening oil prices is a cause of weak demand.
Notably, the European and possibly even Chinese economies are both slowing, which lowers oil demand for the two regions.
Then there's the high U.S. oil production, which could climb to 10 million barrels per day in 2015, Cramer said. Between the weaker demand and higher supply, it's hard to imagine a scenario that propels oil prices back into the $80 range, he added.
However, according to Cramer, Pickens says oil prices can bounce back to the $80 to $90 per barrel range by the end of next year, despite the weaker global demand that's currently hindering prices.
After posting a strong rally on Tuesday, West Texas Intermediate declined to a session low of $55.07 per barrel on Wednesday after inventory builds came in higher than expected. The Energy Information Administration reported that U.S. crude inventories rose by 7.3 million barrels, the highest December reading ever.
There's a lot of oil coming from the Gulf of Mexico too, Cramer said. Gauging supply continues to be a difficult task, as evident by Continental Resources (CLR - Get Report) . The company is cutting back its oil production, but still plans to post double digit production growth in 2015, he reasoned.
So before investors get too excited about the bounce in oil prices, they should realize there's a very real possibility the commodity will head lower due to the bearish supply and demand situation. "I think we can revisit the $52 level," Cramer concluded.
-- Written by Bret Kenwell