Oil, gas and mining

Jim Cramer: I think oil will drop below $20 per barrel

CNBC’s Jim Cramer says he does not think the price of oil is done falling as it faces both demand and supply shocks.

CNBC’s Jim Cramer said Friday he thinks the price of oil will fall further because of demand and supply shocks from the dual crises of the coronavirus pandemic and global producer infighting.

Cramer cited oil prices as something high-frequency, computerized stock market traders are watching.

“I think oil takes out $20,” Cramer said on “Squawk on the Street.” With U.S. oil trading around $21.50 per barrel early Friday, prices would have to fall more than 7% to go below $20. It was down more than 4% late Friday morning.

On March 18, the per-barrel price of West Texas Intermediate crude, the U.S. benchmark, closed just above $20, in an over 24% single-day plunge that was its third worst session ever.

Even though oil bounced 23% the next day, in its best session ever, prices have been generally on the slide since January. WTI, as of Thursday’s New York settle, was off over 66% from its most recent 52-week high of $66.60 per barrel in April 2019.

Demand for oil has fallen dramatically in recent weeks as the coronavirus has led to sharp reductions in travel.

Gasoline demand in the U.S. has dropped “35% to 40%” in the last five or six days as stay-at-home advisories in many states have been implemented, truck stop billionaire Jimmy Haslam said earlier Friday on “Squawk Box.” Haslam runs Pilot Flying J, the largest operator of highway rest stops catering to truck drivers. He also owns the NFL’s Cleveland Browns.

In addition to slumping demand, an oil price war between Saudi Arabia-led OPEC and its allied nations, including Russia, has unsettled supply. Earlier this month, the Saudis announced plans to increase production after an output cut deal among the so-called OPEC+ nations fell apart.

Falling demand and increasing supply has acted as a two-pronged headwind to oil prices.

Some Wall Street strategists, including Morgan Stanley’s Mike Wilson, have argued that the U.S. stock market’s recent sell-off was not solely attributable to the coronavirus. Wilson told CNBC on Thursday that the oil price collapse has played a role, too.

“I just feel like people have to keep their eye on oil,” Cramer agreed on Friday as stocks were headed for sharp declines after the Dow Jones Industrial Average rocketed higher Thursday, capping the best three-session rally in 89 years. “It’s the wild card. It’s the thing that no one seems to be able to stop. And it’s deflationary not at a time we want to see deflation.”

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