There's too much oil. Here's how to trade it

Tanker truck driving past oil refinery
Eddie Seal | Bloomberg | Getty Images

"Halftime Report" trader Joe Terranova, currently in second place in CNBC's Halftime Report Model Portfolio competition, made a trade that will benefit from the oil supply glut in Cushing, Okahoma, the hub for WTI crude.

Even with oil falling another 1 percent Thursday to below $48 a barrel, Terranova bought shares of Valero Energy on the notion that the refiner will benefit as Cushing reaches its capacity limit.

"People are going to have to get rid of all that oil some time," said the trader.

Terranova, who built up an expertise in oil when he worked for Mark Fisher of MBF Clearing Corp. at the New York Mercantile Exchange, points out that the spread between WTI and Brent crude, the European benchmark, is telling us something. European oil is not falling as fast as WTI so the spread between the two has widened to $10 a barrel. Earlier this year, Brent was actually cheaper than the U.S. benchmark.