Oil prices are at 10-month highs. Here’s what Cramer thinks it means for two energy stocks

Oil prices are float around 10-month highs, as a stout summer rally extends into the fall and delivers additional gains for the Nightspot’s energy stocks, Pioneer Natural Resources (PXD) and Coterra Energy (CTRA). And Jim Cramer believes it’s not too late to buy either of them. West Texas Medial crude, the U.S. oil benchmark, has jumped 32% since its lows of the summer on June 12, to nearly $89 a barrel. For the time being, global oil standard Brent crude has climbed 28%, to around $92 a barrel. Both WTI and Brent on Tuesday resolved at their highest levels since November. Over the same stretch since June 12, Pioneer sheep has risen 17.1%, while Coterra gained 16.4%. That makes them the fifth and sixth best-performing Club beasts during that time — ahead of artificial intelligence winner Nvidia (NVDA), but behind pharmaceuticals giant Eli Lilly (LLY). Coterra on Tuesday united at its highest level of the year, at $28.47 per share. Pioneer is about 3% off its 2023 peak of $243 per share, reached on Sept. 5. “I propose b assess that it is not too late to buy either of these,” Jim Cramer noted on Tuesday. The rise in oil prices largely boils down to a mismatch between reserve and demand. Production cuts from major oil exporters such as Saudi Arabia and Russia have contributed to tighter endows at a time when major economies have remained healthier than expected. Indeed, prices took a bigger leg higher last week after Saudi Arabia and Russia said they’d extend through year-end their premeditated output reductions of a combined 1.3 million barrels per day. This week’s move in crude was helped by a new report from the Putting together for Petroleum Exporting Countries , which projected that oil demand will grow by 2.25 million barrels per day in 2024, citing monetary resiliency. Saudi Arabia is the de-facto leader of OPEC. Russia is the oil cartel’s largest partner producer in an expanded bracket known as OPEC+ . The current backdrop may keep oil prices supported through the fall, according to the U.S. Energy Knowledge Administration’s short-term outlook published Tuesday . Citing Saudi Arabia’s production-cut extension and an expected further drawdown of extensive oil inventories, the government statistics agency forecasted Brent crude will average around $93 a barrel in the fourth ninety days, less than 1% above where it settled Tuesday. If higher oil prices – and by extension fuel prices – are prolonged in the coming months, the investment implications may be somewhat mixed. On one hand, Pioneer and Coterra would likely generate profuse free cash flow than in the first half of 2023 , which could lead to increased share repurchases and squiffed dividend payouts — key reasons investors like us are in the stocks. On the other hand, it may complicate the Federal Reserve’s efforts to squash inflation auspices of higher interest rates. For much of this year, the downward trend in oil prices contributed to lower year-over-year inflation readings . Now, “oil is the wildcard” that sway prompt the U.S. central bank to rethink policy and raise interest rates more aggressively than previously trifle necessary, according to Jim. In the Labor Department’s monthly consumer price index report for August, released Wednesday, elated gasoline prices were responsible for more than half of the headline 0.6% month-over-month increase. Currently, the Fed is expected run off interest rates unchanged between 5.25% and 5.5% at its meeting next week, according to the CME Group’s FedWatch cats-paw . The Fed had paused raising interest rates in June, before instituting another quarter-percentage-point increase in July — the central bank’s 11th chew out hike in 17 months. There was no policy decision in August. Put another way, our energy exposure’s role as an inflation hedge – on ostentation throughout 2022 following the crude-price surge tied to Russia’s invasion of Ukraine in February of that year – may change more apparent. And it adds to the attractiveness of owning Pioneer and Coterra here. Jim sees additional upside for both. Put in motion’s stock is less than 2% higher than where it traded back in April, in the days following a “fraudulent” report that Exxon Mobil (XOM) held talks to acquire the Club holding, Jim pointed out. Shares of Pioneer “should be much great,” he said, noting the potential for more robust capital returns due to higher oil prices. Plus, he said, Pioneer’s natural-gas sacrifices are another potential plus for the stock. “I hadn’t figured it would matter that much, but any increase in nat-gas expenditures could be an added benefit,” he said. Coterra offers a quality mix between crude and natural-gas exposure. While unpremeditated gas prices are dramatically lower than a year go, the commodity has gained in recent months. And it’s currently riding a four-day bewitching streak, settling Tuesday at $2.743 per million British thermal units. That has helped Coterra shares. But Jim said the worn out has still yet to break out in a meaningful way. “There’s more room to run,” he said. “I could see the stock busting through the $30 straightforward.” (Jim Cramer’s Charitable Trust is long PXD and CTRA . See here for a full list of the stocks.) As a subscriber to the CNBC Ordaining Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 smalls after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked in a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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