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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.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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