Dan Dicker: Unexpected Catalyst That Could Make Oil Go Up
The death of the Saudi Crown Prince Sultan bin Abdulaziz al-Saud on Saturday is a catalyst that could make oil go up quickly, MercBloc’s Dan Dicker said Tuesday.
“This has been an ax that has been hanging over the head of the oil market for a very long time. We’ve heard rumblings about the problems in the kingdom before,” he said.
Dicker doesn’t see any oil coming out of Libya for another year, so “if the Saudis play into this at this point, boy we are going to see oil go up in a hurry.”
Sultan, who was thought to be about aged 86, had been heir to the throne of the world’s top oil exporter since 2005 but was a central figure in the Saudi decision making since becoming defense minister in 1962. An “Allegiance Council” will appoint his successor.
Dicker also had his eye on the “WTI rally” and the narrowing spread between WTI and Brent .
He thinks the closing in of the spread has more to do with a “hedge fund blow up” than any issues with Brent right now. In fact, he said upcoming rebalancing of the Dow Jones-UBS Commodities Index in January and Brazilian oil company Petrobras' decision to switch to a Brent benchmark are bullish news for Brent.
So, with big earnings on the schedule for the week from names like ConocoPhillips , Exxon Mobile , and Chevron , how should you play the oil trade?
According to Dicker, earnings won’t matter for big integrated companies. While a company like Exxon may blow out expectations, he said the stock will be asking about the XTO trade, natural gas and what the company is doing with its refining assets.
“At this point, what I really do recommend is that you rotate into higher beta E&P and get out of the dividend-paying, big integrated stocks like Exxon, Chevron, [and] so on,” he said.
He bullish Apache , Chesapeake Energy , Anadarko Petroleum and EOG Resources .
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Trader disclosure: On Oct 25, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Terranova is long IBM; Terranova is long AAPL; Terranova is long GS; Terranova is long FCX; Kelly is short British pound; Dicker owns CHK; Dicker owns COP; Dicker owns HP
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