Oil fell to its lowest level in nearly three months on Tuesday, extending a steep slide since mid-July on mounting evidence high prices and a souring economy are cutting into world energy demand.
The drop coincided with a firmer U.S. dollar, which may have reduced the appeal of commodities to some investors playing the strong negative correlation between the markets in recent months, analysts said.
"At $120 I think we’re testing bear market territory for oil which I think bodes well for the stock market," says Jon Najarian on CNBC’s Closing Bell.
"If you’re looking for a play check out the Energy Select Sector SPDR which is an ETF of integrated oil stocks. I think integrated oil is way too cheap at current levels."
"However, I would not be looking at the drillers. I think it will take 30-60 days before you should jump on them."
Meanwhile, Merrill rose on Wednesday after the brokerage said it will write down $5.7 billion and raise $8.5 billion by selling new stock.