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Take Your Position: Big Oil

Energy was a bright spot in Tuesday’s market largely due to strong earnings from BP . How should you game the rest of big oil earnings?

After a tough year for Exxon , whose stock is down 7 percent in 2009 investors will be paying close attention to the company’s outlook.

"We want to make sure the projects in the queue are going as planned, and hopefully there will be production growth in 2010," says Neal Shah, senior energy analyst with First American Funds.

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Earnings Calendar: Oil

Tuesday: BP, VLO
Wednesday: COP, HES
Thursday: XOM, PDE
Friday: CVX
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Exxon is expected to report a 63 percent drop in profit to $4.94 billion, or $1.06 a share, according to the average on Thomson Reuters I/B/E/S.

Meanwhile, Chevron had a busy third quarter, naming a new chief executive and taking the wraps off plans for a huge natural gas project in Western Australia known as Gorgon.

Analysts want more details on Gorgon, in particular, as well as how output is ramping up at new projects that started producing in 2009 for the San Ramon, California-based major.

Like Exxon, analysts on Thomson Reuters I/B/E/S see Chevron profits dropping 63 percent to $2.91 billion, or $1.43 a share.

Smaller rival ConocoPhillips is expected to show a 72 percent drop to $1.42 billion, or 94 cents per share.

Conoco warned this month that its quarterly profit would be hit by weak U.S. natural gas prices, but made waves in the industry and boosted its share price by announcing a few days later plans for $10 billion in asset sales.

What must you know to trade the space?

I’m bearish on oil, explains Deutsche analyst Paul Sankey. The winter forecast doesn’t seem terribly fierce demand is falling and supplies are certainly adequate. Also Marathon has a new refinery coming on line.

If you're looking for a trade, consider long Conoco but as a restructuring story and outright short Valero because refiner margins are shrinking, he says.

I believe oil prices will sustain, counters Joe Terranova and I’ve got my eye on Hess . It’s highly correlated to the price of oil so I’m thinking Q3 will be strong. I’d be a buyer of Hess as a bet that oil moves higher from here.

I’d play the space with the oil services names, such as RIG .

For me the best play in the space is BP, adds Pete Najarian.


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Trader disclosure: On Oct. 23th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (BX); Najarian Owns (GE) Calls; Najarian Owns (LAZ) & (LAZ) Puts; Najarian Owns (MYL) Call Spread; Najarian Owns (RIMM) Call Spread; Najarian Owns (WFT) Call Spread; Najarian Owns (YHOO) & Short (YHOO) Calls; Najarian Owns (STX) Calls; Najarian Owns (CLF) & Short (CLF) Calls; Finerman Owns (RIG), (TGT), (WMT), (WFC), (PDE); Finerman's Firm Owns (BAC) Preferred; Finerman Owns (BAC) Preferred; Finerman's Firm Owns (WFC), (FLS), (MSFT), (PBR), (PDE), (RIG), (PLCE), (TJX); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO), (UNG); Terranova Owns (HES), (JPM), (IBM); Seymour Owns (AAPL), (BAC), (EEM), (FXI), (SBUX)

For Jamie Baker:
JP Morgan Owns (UAUA)
JP Morgan Has An Investment Banking Relationship With (UAUA)
JP Morgan Has An Investment Banking Relationship With (CAL)
JP Morgan Has An Investment Banking Relationship With (AMR)

For Paul Sankey:
Deutsche Bank Owns (VLO)
(VLO) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Has Received Compensation From (VLO)
(VLO) Has Been A Client Of Deutsche Bank In Past Year

Deutsche Bank Owns (HES)
(HES) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Has Received Compensation From (HES)
(HES) Has Been A Client Of Deutsche Bank In Past Year
Deutsche Bank Owns (BP)
(BP) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Has Received Compensation From (BP)
(BP) Has Been A Client Of Deutsche Bank In Past Year
Deutsche Bank Owns (OXY)
(OXY) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Has Received Compensation From (OXY)
(OXY) Has Been A Client Of Deutsche Bank In Past Year
(SUN) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Has Received Compensation From (SUN)
Deutsche Bank Owns (PDE)
(PDE) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Owns (COP)
(COP) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Has Received Compensation From (COP)
(COP) Has Been A Client Of Deutsche Bank In Past Year
Deutsche Bank Owns (CVX)
Deutsche Bank Has Received Compensation From (CVX)
(CVX) Is an Investment Banking Client of Deutsche Bank
Deutsche Bank Owns (XOM)
Deutsche Bank Has Received Compensation From (XOM)
(XOM) Is an Investment Banking Client of Deutsche Bank

For Peter Schiff
Schiff Is Long Gold
Schiff is Short U.S Dollar


CNBC.com with wires

Symbol
Price
 
Change
%Change
BP.
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COP
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CVX
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HES
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MRO
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RIG
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XOM
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