The losses came despite supply disruptions after Hurricane Ike crashed through the Gulf of Mexico last week and left a quarter of the nation's energy output idled.
"People are getting out of commodities and getting into safer havens, like bonds," said Andy Lebow, broker at MF Global in New York.
"If the economic turmoil continues, demand will continue to drop," said Jonathan Kornafel, Asia Director at U.S.-based options trader Hudson Capital Energy. "It's a bit of panic in the markets."
And that panic removes fundamental supply and demand from the equation. “Once oil went below $95, it was trading on de-leveraging,” explains CNBC’s Joe Terranova. In other words investors were taking profits.
“The true price of oil is probably between $85 - $110,” he speculates. Yes, that's right where we are now. Terranova thinks oil has found its trading range.
"And with oil at fair market levels energy stocks should begin to work on pure fundamentals,” he concludes, “because the fear and the resulting aggressive sell-offs should stabilize.”
How do you trade it?
I’d play it with oil services names such as National-Oilwell Varco or EOG Resources. But it’s not a United States OilFund or United States Natural Gas Fund play, Terranova concludes.
I bought Devon on Tuesday, adds Karen Finerman. I think the huge rotation out of energy might be coming to an end.
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Trader disclosure: On Sept 16, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (MSFT), (WMT), (UUP): Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman Owns (GS); Finerman's Firm Owns (DVN), (GE), (MSFT), (NOK), (SUN), (TSO), (VLO), (PM); Finerman's Firm Is Short (XLF), (IYR), (IJR), (MDY), (SPY), (IWM); Finerman's Firm Owns (DNA) Calls ; Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (AIG) And Is Short (AIG) Calls; Najarian Owns (MS) And (MS) Put Spread And Is Short (MS) Calls; Najarian Owns (NOK) And Is Short (NOK) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TSO) Call Spread; Najarian Owns (WB) Put Spread; Najarian Owns (WM) And (WM) Puts; Najarian Owns (XLF) And (XLF) Collar
Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Diversifier PHOLIO Owns (IGE); (DBC); (DBV)
Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.
Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (BRE), (CNTY), (CNW), (CLB), (OFC), (DLM), (DRH), (DLR), (EPR), (ESS), (EXR), (AGM), (FL), (GBL), (GNET), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (GWX), (SSYS), (SKT), (UA), (BIV), (VV); Phoenix Investment Partners Owns More Than 1% Of (BLV); Phoenix Investment Partners Owns More Than 1% Of Goldman Sachs Financial Square Fund - Money Market Fund; Phoenix Investment Partners Owns More Than 1% Of Seagate Technology Tax Refund Rights
GE Is The Parent Company Of CNBC