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Halftime: Avoid Oil Due to Accident on Gulf?

Oil services stocks briefly sold off before bouncing back Thursday, as two catalysts pushed them down: an incident surrounding an oil and gas production platform off the coast of Louisiana and uncertainties about the future of offshore drilling.

Separating fact from fiction, the "Fast Money" traders got to the bottom these concerns with reporting from CNBC's Scott Cohn on the incident in the Gulf and an interview with the CEO of a company that's filed a lawsuit to stop the moratorium on offshore drilling.

A platform operated by Mariner Energy caught fire as 13 crew were painting and sandblasting the facility, which is in 300 feet of water in the Gulf of Mexico, reports Cohn. All seven wells, which the platform services, were shutoff and no oil has leaked from the site.

Initial reports suggested there was an explosion, which triggered fears on another incident, similar to that of the BP oil spill. Jittery investors sold shares of Mariner Energy and the stock fell sharply. The stock bounced back after CNBC reported there was no explosion. This is a good example of why investors should avoid trading headlines, said Pete Najarian, co-founder of optionMONSTER.com.

Apache , a Houston-based oil and gas exploration, development and production company, agreed to buy Mariner for $2.7 billion in April. News of Thursday's incident initially sent its shares lower too, but Guy Adami of Drakon Capital doesn't think it will affect the merger.

Adami maintained that if Apache trades below $90 a share, it's a buy. He said it flirted with those levels after news broke about the incident in the Gulf, but is still attractive if you like natural gas and want exposure in the space.

Looking at the oil services space overall, Steve Cortes of Veracuz said there won't be any new offshore exploration near the US in the near future, as a result of the BPoil spill. Cortes recommends looking at foreign offshore exploration, including Petroleo Brasileiro and PetroChina. He also likes domestic onshore names, like Oasis Petroleum .

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CEO: Stop Ban on Offshore Drilling

Earlier this week, a federal judge allowed a lawsuit against the deepwater drilling ban that's been imposed by the White House to proceed. Following news of the incident with the Mariner platform, the CEO of one of the companies pushing the lawsuit brushed off insecurities some may have about the dangers of offshore drilling.

"You have to look at each incident in any industry your in individually and specifically," said Todd M. Hornbeck, CEO of Hornbeck Offshore Services . "Just like any incident on the highway, or building a building or anything else, you have to look at it individually."

Hornbeck wants offshore drilling to resume quickly. He said a ban on offshore drilling, he said, is "crippling" the entire industry. Using a "blanket brush" to address any issue with offshore drilling is not warranted, he said. The incident with the Mariner platform or any other situation is not reason to shutdown the entire industry, he argued. Besides, he said his Covington, La.-based company is "safe" and uses many safety measures.

Deepwater drilling will expand, he said, and continue to "increase worldwide no matter what happens to the Gulf of Mexico." The US needs hydrocarbons, as an important element to the US' success, he said.

What's the Trade?

Najarian recommends looking at oil services stocks because there is "cheap value" right now and investors can afford to buy protection.

Grasso agreed with Hornbeck that any ban on offshore exploration or drilling is uncalled for. If the country needs to get people back to work, the White House should not be shutting down this industry.

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Trader disclosure: On Sept. 2, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT): Adami’s wife works at Merck; Cortes owns (SFD), (FCX), (BHP), (BMO), (TD), (OAS); Cortes is long British Pound; Cortes is long Euros; Cortes is long Crude Oil; Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (BAX
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

For Dennis Gartman
Funds managed by Gartman own Wheat, Corn

For Pete Najarian
Pete Najarian owns (BRCD) call
Pete Najarian owns (AKAM) call spread

CNBC.com with wires.