What Is Oil Telling Us?

Has OPEC become irrelevant to the commodities market?

It certainly feels that way, lately. On Wednesday OPEC oil ministers agreed to their deepest output cut ever, slashing 2.2 million barrels per day from the oil markets.

The cut, effective January 1, comes atop existing curbs of 2 million bpd agreed by OPEC since September.

But despite the historic move, oil prices tumbled to new four-year lows.

On the news light, sweet crude for January delivery fell more than 5 percent, or $2.21, to $41.39 on the New York Mercantile Exchange. Benchmark crude prices fell as low as $40.20, a price last seen in the summer of 2004.

“OPEC doesn’t have the power to control oil in this environment,” explains Joe Terranova. “The economy is in control.”

Meanwhile U.S. gasoline inventories continued to rise providing further evidence of a major pullback by American motorists. Demand for gasoline over the four weeks ended Dec. 12 was 2.7 percent lower than a year earlier.

"You've got a commodity that people are buying less of because they can't afford to buy more," observes Phil Flynn, an analyst at Alaron Trading Corp. "People are fearful. They have a lack of confidence in the economy. They're closing their factories."

What’s the trade?

The first quarter is generally the weakest quarter of the year for oil, explains Terranova. I would not get long oil.

If you’re looking to play the energy complex I’d do it with ExxonMobil or EOG Resources . And stay away from the refiners, they have a lot of debit.

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Trader disclosure: On Dec. 17th, 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 (MCD), (MSFT); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (ENER) Call Spread; Najarian Owns (UYG) And Is Short (UYG) Calls; Finerman's Firm Owns (MSFT), (IBB); Finerman's Firm Owns (OIH) Puts; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (VNO), (FCE.A), (USO)

Terranova Owns (XOM), (EOG)

Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO: Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.: Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (OFC), (DLR), (EXR), (IGE), (MAC), (DBC), (DBV), (SKT), (UA), (CLB): Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights

GE Is The Parent Company Of CNBC