The oil factor
West Texas Intermediate crude has been on a tear since January, gaining 50%, but Cramer believes prices have peaked.
“I’m calling the top right here in oil,” the “Mad Money” host said on “Squawk on the Street” on Thursday. “You can hang me on it if you want to,” he added.
He believes that US companies will begin to restart production, and that output from the Permian Basin will increase by one million barrels per day. This increase in supply comes on the heels of OPEC and its oil-producing allies reportedly nearing an agreement to increase production as well.
“The economy will not be able to handle it. “Because the economy lacks demand, there will be a supply tipping point,” Cramer predicted.
Enthusiasm has since waned. On Thursday, the contract was trading about 1% lower at $72.53 per barrel.
Oil’s meteoric rise this year has been fueled by producers around the world curtailing output, while demand has recovered as global economies reopen.
According to the International Energy Agency’s monthly oil market report released Tuesday, demand “surge[d]” by around 3.2 million barrels per day in June to a total of 96.8 million barrels per day. In contrast, supply increased by 1.1 million barrels per day, bringing total production to 95.6 million barrels per day.
Some, including Bank of America, have called for $100 oil amid a recovery in demand and supply constraints.
“With the oil market likely to remain in deficit as a result of this rapid sequential demand increase, we expect inventory pressure to persist. According to our projections, the oil market will likely remain in deficit for the foreseeable future, with a shortfall of 0.9 million barrels per day over the next six quarters,”
UBS expects the market to cool in the second half of the year, but believes oil will remain strong for the time being.
“With the oil market already in deficit and demand growth outpacing supply growth, the crude market is likely to tighten further this summer,” UBS wrote in a client note Thursday. WTI is expected to trade at $77 between now and September, while Brent is expected to reach $80.
UBS forecasts WTI at $72 by the end of the year, with Brent at $75.
The Covid delta variant
“We’re getting a lot of negative feedback on delta variant from all over the world, as well as absenteeism. It has not been resolved. Many countries simply do not have enough vaccines,” Cramer said on “Squawk on the Street.”
When asked directly by co-host David Faber if the delta variant is a potential “market spoiler,” Cramer said, “Yes, because there are too many breakthrough instances,” referring to people who have been vaccinated against Covid becoming infected despite being vaccinated.
Despite this, evidence suggests that vaccines continue to be very effective at protecting against severe disease, hospitalization, and death.
“We’ve done a great job vaccinating in this country. “There are many other countries that are critical to our supply chain that have not been vaccinated,” Cramer explained.
Since the beginning of the global outbreak, the coronavirus has caused major supply chain disruptions, beginning in China, where the virus was first detected in late 2019.
For example, two major Nike suppliers in Vietnam recently had to halt production due to a coronavirus outbreak in their factories. This demonstrates Covid’s continued economic impact around the world, despite the fact that most pandemic restrictions have been lifted in the United States.
According to Reuters data, Vietnam is currently experiencing its highest-ever daily average of new Covid cases, at just over 1,200. So far, less than 300,000 people in Vietnam have been fully immunized. According to the World Bank, the population of that country is approximately 97.3 million people. The population of the United States is approximately 330 million people. According to the most recent Centers for Disease Control and Prevention data, just under half of the population has been fully vaccinated.
The “Mad Money” host also mentioned Taiwan’s geopolitical complications in its pursuit of vaccine doses. Apple suppliers Foxconn and Taiwan Semiconductor Manufacturing announced earlier this week that they had reached an agreement to purchase 10 million doses of the Pfizer-BioNTech two-shot vaccine, which they intend to donate to Taiwan’s government.
According to a FactSet transcript, the vaccine deal was discussed on Taiwan Semiconductor Manufacturing’s conference call on Thursday. Chairman Mark Liu emphasized the importance of vaccinating a larger proportion of Taiwanese citizens, calling it the “first priority.” According to Reuters, less than 1% of that country’s 23.5 million people are fully vaccinated. Approximately 20% of the population has received at least one dose.
With the pace of new vaccinations in the United States slowing, Cramer proposed that the country send extra doses to “Southeast Asia, where they’re desperate, or to India.”
According to the CDC, approximately 160 million people, or 48 percent of the U.S. population, are fully vaccinated, and nearly 185 million people, or 56 percent of the population, have received at least one Covid vaccine dose.
Coronavirus cases are increasing in the United States as the Covid delta variant spreads. According to an analysis of Johns Hopkins University data, the seven-day average of new daily infections is 25,255. This is a 68 percent increase over the previous week.
According to an analysis, the majority of U.S. counties with high infection rates – defined as at least 100 new cases in the previous seven days per 100,000 residents – have less than 40% of their population fully vaccinated.
Almost all new Covid hospitalizations and deaths are caused by people who have not been vaccinated, according to US officials, providing a real-world assessment of the vaccine’s effectiveness.