Much of Wall Street is worried that sliding oil prices could be a sign of global economic weakness, but CNBC’s Jim Cramer offered a counter-theory on Friday as he prepared investors for the week ahead.
“I read the decline in oil as an issue of supply overwhelming demand, not demand waning,” he said on “Mad Money.” “When that happens, it’s terrific for both consumers and for business. You’re paying less at the pump; industry’s paying less on the big bill.”
Oil prices fell for their 10th consecutive trading session on Friday, cementing the longest losing streak for U.S. crude since mid-1984, according to Refinitiv data. On Thursday, Cramer said he could make a case for $40-a-barrel prices.
But considering the fact that the United States is producing 12 million barrels of oil a day, up significantly from past years, Cramer found it hard to believe that there was an issue with demand.
“I think lower oil actually creates a virtuous circle and that people are too negative. And it happened just like last time, where we learned … that cheaper fuel is actually good for 90 percent of the S&P 500 as long as it’s caused by excess supply,” he said.
“So what do you do with your portfolio? Nothing,” he continued. “Let this nonsense play out. Get ready to buy some high-quality stocks of companies that benefit from lower oil. It worked last time and it’s going to work again, provided the Fed figures out that inflation is going down, not up. There’s no hurry.”