Oil just keeps tumbling, but you shouldn’t be too worried, traders say

Oil endured an August drop amid supply concerns and uncertainty over September's OPEC meeting, but two traders think that investors have nothing to worry about.

Erin Gibbs, chief investment officer at S&P Global, thinks that oil has seen better times. But energy stocks have not seemed to take a beating.

"When you actually look at earnings estimates for the energy sector, they have actually stayed incredibly stable over the last three weeks," she said Thursday on CNBC's "Power Lunch." "We really haven't seen any change, and we also haven't seen any change in valuations."

Looking at a chart of the energy sector's valuation, Gibbs points out that the sector still trades at about 42 times forward earnings. Energy has traded relatively flat for the past two months.


"When it comes to energy stocks, we're actually seeing a fair amount of stability," Gibbs said. "The energy sector is trading in this fairly tight range of $490 to $520, and right now we're in the middle of that range just like we are with the price of oil between $40 and 50."

This all comes as oil hit a three-week low during Thursday trading, falling more than 2 percent during the day.

RJO Futures senior market strategist Phillip Streible also believes that oil's drop isn't too big of a concern, especially the oil supply glut that has investors nervous.

"If you take a step back and really look at that larger picture here, new oil discoveries, they're at a 70-year low," he said. "So OPEC, U.S. and Russia, they've maxed out our output [and I don't think] our technology is getting much better

Streible sees oil eventually breaking through the important $50 a barrel level.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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