2021-10-18 15:54:35

CNBC’s Jim Cramer said Monday the oil rally could eventually unsettle the stock market.

“If you want the rest of the stock market to keep climbing, oil needs to stop going higher, otherwise we’re toast,” the “Mad Money” host said, after the price of West Texas Intermediate (WTI) crude hit $83.87 on Monday, which is the highest level since October 2014.

Cramer said that price is “much too high for my taste,” while seeking to draw attention to what he believes is contradictory behavior in the markets.

“The oil stocks and their fellow travelers make up less than 10% of the S&P 500. When they’re roaring, it causes nothing but trouble for the other 90%,” Cramer said. “Here’s the issue, though. Despite the relentless price increases, oil’s rise … hasn’t impacted the stocks of any of the big energy consumers while it buoys the stocks of the energy producers.”

For example, Cramer pointed to airlines and other industries related to travel and leisure.

“These groups … have stocks that have been incredibly strong, especially — and this is really the conundrum — the hotels,” Cramer said. “In fact, if you overlay Marriott’s chart over the chart of any oil stock, they appear almost identical over the last 7 weeks. That makes no sense.”  

Similarly, Cramer said the stocks of companies in the transportation sector — which should also be sensitive to fuel costs — have been “acting pretty well, too.”

“Again, that shouldn’t be happening. This is a zero-sum game; when oil wins, the transports lose,” Cramer said.

Cramer said oil production needs to increase to meet the increased demand during the Covid pandemic recovery. If it doesn’t, he said even higher prices could be in store “and that would be the lose-lose [situation] we’re worried about.”

He noted that some have predicted oil could touch $100 per barrel, at which point “maybe it prices itself and causes demand destruction.”

“It would mean oil has strangled the whole economy. It hasn’t happened yet obviously … but it could,” he said.

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