Nasty Day in the Oil Patch

Crude oil started to rollover today, after breaking below the psychological $50 level. That led to a mass exodus out of the oil stocks, causing the oil service index (OSX) to decline -4.5%. Nasty.

I am hearing people making predictions that oil will fall back below $40, and that will hurt the projected earnings power of most of the oil-related stocks. I think those predictions will be false. I think the price of crude has good support in the mid-$40s, first of all, and stronger support near $40. If oil continues to trade in the range of low 40s to the low 50s, then the earnings estimates for most oil stocks will continue to be revised higher, and the stocks will follow suit.

I still like the energy sector, and would use any continued weakness in the stocks to start to build positions. This is likely just the first real correction in a bull market for energy that could last for years.