Considering oil slipped down to $83 and change on Friday, lower than most traders ever expected, shouldn’t it at least plateau if not rebound?
According to top Deutsche Bank energy analyst Paul Sanke don’t hold your breath. He thinks the weakness continues.
“In terms of fundamentals oil doesn’t look that bad," he says, but right now fundamentals aren't driving the price action.
The euro is. "I’ve got to say I’m worried about the euro and what it’s going to do to the oil markets,” he says.
Here's why.
"More than 90% of world oil is traded in dollars,” he explains. And as the euro slides lower the dollar get stronger. That, in turn is negative for oil because it makes oil more expensive for buyers using other currencies.
And Sanke doesn't believe the decline in the euro is over - not by a long shot. “I don’t think anyone has any conviction in calling a bottom in the euro," he says. “That’s the thing to watch. The lower the euro goes – the further oil slides – that’s the essence of it."
If you must play energy, how should you trade in this volatile environment?
Sanke tells us to be defensive. “Look for yield and buybacks. His favorite names in the space are Exxon and Chevron . And he says “Occidental has been punished unfairly.”
Trader Pete Najarian agrees. He also likes integrates names. “They’re not quite as volatile and they generate yield,” he says.
Trader Jon Najarian says his favorite name in the space is BP.
Trader Josh Brown likes ConocoPhillips , which he calls really cheap. “The stock is trading at 5.7 times earnings while the industry average is 8 times earnings and the historical average is 10.”
Posted by CNBC's Lee Brodie
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Trader disclosure: On June 1, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jon Najarian is long FB CALL SPREADS; Jon Najarian is long DAL CALL SPREADS; Jon Najarian is long JPM CALL SPREADS; Jon Najarian is long GS CALL SPREADS; Jon Najarian is long VIX CALL SPREADS; Jon Najarian is long CIGX; Jon Najarian is long DDMG; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long GLD; Pete Najarian is long AAPL; Pete Najarian is long AAPL CALLS; Pete Najarian is long C; Pete Najarian is long GDX CALLS; Pete Najarian is long INTC; Pete Najarian is long SBUX; Pete Najarian is long PEP; Pete Najarian is long FB; Pete Najarian is long JOY; Josh Brown is long COP; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long XLU; Steve Grasso is long ZAZA
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