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Finerman's Crude Developments

It seems crude oil stocks are working, even when the commodity itself is not. What’s going on?

We know that sounds counter-intuitive but it seems to be the case. Don’t believe us? The following two charts tell the story.

Below you see the United States Oil Fund (USO) which tracks the spot price of oil. Year to date it’s down around 17%.

Now take a look at the Oil Service HLDRS ETF commonly referred to by it’s ticker symbol OIH.

It’s up 22% for the year. Remember this is an ETF made up of companies such as Schlumberger, Transocean and Halliburton – that is firms that are involved in oil exploration and drilling.

What’s going on?

The divergence is because the spot price of crude is contango, explains Karen Finerman. The near months are trading much lower than the out months. By comparasion, the OIH looks out further – much further than where spot oil is trading right now.

And I don’t expect the divergence to reverse anytime soon, she adds.

What's the trade?

The OIH probably has room to go on the upside, says Finerman.

I’d look at Baker Hughes , counsels Guy Adami.

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Trader disclosure: On Apr 22th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Seymour Owns (BAC), (EEM), (FXI), (TCK), (INTC), (FIC); Seymour Is Short (AAPL), (FCX), (POT); Finerman's Firm Owns (AXP), (RIG), (UNH), (TBT), (ELX); Finerman's Firm Owns (BAC) Preferred; Finerman's Firm Owns (C) Preferred; Finerman's Firm Owns(MSFT) & (MSFT) Put Spread; Finermans Firm Is Short (IJR), (MDY), (SPY), (IWM), (USO); Najarian Owns (PALM); Najarian Owns (BX) Call Spread; Najarian Owns (MCD) & (MCD) Calls; Najarian Owns (MS) & (MS) Calls; Najarian Owns (RHT) Call Spread; Najarian Owns (RIO) Calls; Najarian Owns (VAR) Call Spread; Najarian Owns (XHB) Cal Spread; Najarian Owns (XLB) Call Spread; Najarian Owns (ANR)