Jim Cramer has a bleak outlook for the oil industry no matter who wins the White House next month.
On Thursday’s episode of “Mad Money,” the CNBC host said the oil market faces a tough future under a second Trump administration or a potential Biden administration after the November election.
“I’d say stay away from the whole group, because my long-term forecast is grim,” the “Mad Money” host said. “Regardless of who wins the election next month, it’ll be bad news for the oil industry,” he said.
At the vice presidential debate the night before, Vice President Mike Pence and vice presidential candidate Sen. Kamala Harris sparred over what fracking and fossil fuel policy would look like with a President Donald Trump or potential President Joe Biden in office.
U.S. oil producers are generally uninvestible, given the oversupply of crude in a low-travel environment and the direction that energy is headed in, Cramer said.
“President Trump is a drill-baby-drill kind of guy” and overdrilling has “crushed the price of crude,” he said. Biden may not ban fracking, but “Democratic presidents tend to hit the whole oil complex with more rules and regulations, which is really bad for profits,” he added.
In the debate from Utah, Pence said that Biden is campaigning to ban fracking, an accusation Harris denied. Biden, in his $1.7 trillion climate change plan, lays out a goal for the U.S. to eliminate its greenhouse gas emissions over the next three decades by equipping the country with clean energy in efforts to grapple with the realities of climate change.
Trump has not detailed a plan to address growing climate concerns, but the president has touted himself as a vanguard for the energy market and boosting oil production.
“Either way, the future doesn’t look great for the oil complex. That said, I expect oil to mount one more run because so many investors are counting on it between here and year-end,” Cramer said. “More and more money managers recognize that oil, though, is uninvestible, and that doesn’t mean, though, that it’s not untradeable.”
Oil prices continued to climb higher Thursday, rallying more than 3% after dipping the day prior. Brent crude futures settled at $43.45, while West Texas Intermediate crude was $41.35 per barrel late Thursday. Both benchmarks are down almost 30% from the beginning of the year.
While demand for oil is growing as business and activity attempt to recover, the supply side of the table is what worries Cramer.
The host, who is generally bearish on the oil market, offered two ideas for investors looking to pick up lagging stocks in the space. He endorsed Chevron, which is down 37% this year, for paying a 6.85% dividend and Parsley Energy, which is down 46% year to date, for growing double digits prior to the economic crisis brought on by the pandemic.
“As the price of crude works its way to $45, I am blessing you … buy Chevron or Parsley for a trade,” Cramer said. “Chevron’s got that dividend; Parsley’s got the growth.”