For oil, the Iran deal won't change much

That's because world demand for it is pretty much insatiable.

By Jim Cramer Nov 25, 2013 11:13AM

TheStreet.com logoOil derricks © Comstock/CorbisWhy isn't oil down more? It's a legitimate question, given that the Iranian deal isn't just about some oil being added to the market. This is about the odds that Iran, the biggest trouble-maker in the Middle East, is most likely to block up the Strait of Hormuz -- where 20% of the world's oil must travel through -- and the prospect that it will no longer do so.

 

I do not believe this was a surprise agreement. The oil traders -- in addition to, at times, apparently rigging the entire market -- seemed to know what was up well ahead of time. It would appear to me that the following is the reason oil hasn't gone through $90 per barrel yet, as so many have been waiting for: Real economic demand for oil is blunting the decline at these levels.

 

We know, for example, that the Saudi exports are their highest level in eight years. We know Iraq is pumping 3.5 million barrels a day, up dramatically from just a few years ago, and that the U.S. is pumping more oil than at any time since 1989. Yet, despite all this, prices haven't fallen that hard. I don't think this new oil from Iran will really add enough supply to make a difference internationally, where oil has stayed tight all along.

 

The spread between West Texas Immediate and Brent crude, which had narrowed to about zero this summer, is now back into place with a $15 differential. That has caused refinery stocks to come roaring back to become one of the great money-makers of 2013 -- something that Dan Dicker predicted here on our site. This is not a demonstration of how much oil we have found in the U.S., because the decline in WTI has to do with shipping problems domestically. Rather, it shows that world demand is pretty much insatiable. Just a little more bit more from Iran just doesn't seem as if it will matter.

 

That brings us back to a central issue: Oil is high because the world's economies, particularly China's, are actually doing better than we think they are. I continue to look at the large, internationally oriented domestic companies and marvel at how well they are performing in Asia, and how Europe as bottomed. The tightness in the international market is emblematic of that -- as is, by the way, the fabulous performances of the international oils. Notable among these are BP (BP), Exxon Mobil (XOM) and Chevron (CVX), as opposed to the domestics, which seem to be held hostage to the West Texas price.

 

That's why it is more important than ever to follow Brent. You need to notice that the $108 level represents a strong market that's not going to come down much at all, even given the additional 1.5 million barrels that are expected to hit the market as we free up some of the sanctions on Iran.

 

Because our markets aren't linked that well at all with Brent right now, don't expect a further decline in West Texas. But don't expect an increase, either.

 

To me, stasis at the $93 level seems about right, with an occasional dip to $91 and an occasional increase to $95. That's barring some sort of shock to the system -- the odds of which just went down pretty dramatically thanks to this historic agreement.

 

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the securities mentioned

 

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92Comments
Nov 25, 2013 12:38PM
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First off we have NO allies in the Middle East...We have users, beggars and dirt bags.

And NONE of them have American's interest at heart.

Nov 25, 2013 1:18PM
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The Quran teaches that it's OK to lie and deceive when dealing with infidels.  That's us, folks. and Iran's Mullahs have no intention of complying with any agreement with the naïve West.  Kerry and the rest were patsies in this deal.  Stay tuned.

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Let's check reality here. Most West Texas oil is still pumped out of the ground at a price of $5 a barrel and Gulf of Mexico Oil for $20 a barrel

 

Yet gas prices are priced on the spot market for oil in the future contracts.

 

Hmmmm most oil future contracts are never filled --- this should be your first clue something is wrong

 

Let's say an Oil company wants the price of oil at $130 a barrel so he can make $125 on his West Texas barrel. Oil company has like 20 million barrels ready to make into gasoline so getting the price from $100 a barrel to $130 a barrel on the spot market will on margin cost them say $220 million dollars. They make a fake company up loan it $220 million that company buys on margin $220 million dollars of oil on the spot market for $140 a barrel pushing up the overall price to $130 a barrel.

 

The oil company can now price the gas $30 a barrel more for 20 million barrels this is an increase of $600 million dollars to them almost a three times return on the $220 million they have pumped into the futures market.

 

Everyone gets pat on the back for a job well done and the company has generated a $220 million tax credit when the fake trading company goes belly up.

 

Life is good in the oil patch and the money keeps on flowing.

Nov 25, 2013 1:47PM
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If we all hold hands and hope maybe our enemies will change.  How some Americans fail to understand we are hated because of our arrogant medalling in others religion is comical. And to see them think signing a piece of paper makes it  okay? Americans have been insulated and removed from reality. In other words brainwashed by a liberal media and a false sense DC politicians are capable of doing anything they say. Ever heard the expression living on borrowed time?
Nov 25, 2013 1:12PM
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The Iran plan is simple .......... delay and achieve the goal of nuclear weapons. Plain and simple. If you think otherwise you're an idiot............... period.
Nov 25, 2013 11:44AM
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the oil barrons know they can price fix.  the levels that "we" are willing to pay has been shown.  so why lower the prices much if at all?
Nov 25, 2013 1:59PM
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Before Israel become a nuclear power did we hear their leaders ranting on about annihilating Iran? Did Israel call us "The Great Satan"?....... Burn our flag?
Nov 25, 2013 2:23PM
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Well no housing or job rebound like I have been saying for how long now? And now reports continue to describe the contraction in GDP and growth forecasts. This bad movie needs subtitles for many of these kool aid drinkers. Why in the eff don't people get it? You don't have a growing expanding economy if you don't produce and grow jobs. Why give America up for the benefit of the rest of the world? What America now does better than any other is grow fools. Shall we celebrate our accomplishment?  Yea and some probably would toast that. Oh yea being stupid is really cool.Not
Nov 25, 2013 12:52PM
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One MSN article says oil prices could fall ..  Cramer says nothing will change ... MSN. please, some consistency.   We expect better from you.
Nov 25, 2013 1:15PM
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The Iranians will use your Liberal politicians like 3 dollar whores to get their nukes... Watch and see.
Nov 25, 2013 11:22AM
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The Iran deal might not change much as far as oil is concerned.  But the safety and security of the US and our allies - that changed quite a bit, and not in a good way.  And around here, gas prices went up a nickel over the weekend.

Nov 25, 2013 4:36PM
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The only reason oil is staying high is because Wall Street and the Big Banks are keeping it that way for their own gain. I agree it will not drop because these crooks will not let it. We need to remove the Big Banks from the commodity equation and force the oil traders to take full physical delivery of each and every oil trade that they make. If not, nothing will ever change with high oil prices.
Nov 25, 2013 5:39PM
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Wait a minute! I just read where the U.S. is now the leading oil producer. It's obvious that we as a nation are slowly getting away from using the middle east for oil. How long will our oil last, based on current use?  
Nov 25, 2013 12:00PM
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"Economies of the world doing better than we think they are".  Hmmm you reading minds now Jim? And the EU is improving?  I think any improvement we are seeing lately is because of lower oil prices. And I don't think prices will stay that way much longer. Too many opportunists and politics to base a future on oil prices.
Nov 25, 2013 2:44PM
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TRAINING VIDEO ?????? 

POTTY TRAINING ???    OR LITTER BOX ??


Nov 25, 2013 12:43PM
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If oil prices are not where we think they should be, there must be some kind of market manipulation.
Nov 25, 2013 1:02PM
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The Iran deal, signed by JOHN CHANBERLAIN KERRY, probably not have much effect on the price of oil. I think we can say  that the Iran deal will have a huge detrimental effect on our  international security interests/safety. . We are visiting the thirties again, by bending over  for a despotic regime, just like England's Lord Chamberlain did in the thirties, setting up Hitler and WWII.
Nov 25, 2013 1:39PM
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"It's not based on trust, it's based on verification...."

ie; concerning Iran and Nuke deal.

Nov 25, 2013 1:19PM
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I personally don't believe you are going to learn much from MSN or Cramer about Oil production, exploration, discoveries or finds Worldwide...Better to go to sites that specialize, or be invested in Energy plays and keep up with their Company progresses.


ie; Oil/Ngas producers, explorations, Pipeline companies, Coal companies and Refiners. Along with other forms of transportation, Rail or Shipping.

Actually you don't even have to be invested, just subscribe to their information. 

Nov 25, 2013 3:49PM
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Twit and drip drip drip all the way to the low teens. But like Jim said you didn't really lose money you just got in at the wrong price.  LMFAO
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