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Stocks drop after oil hits historic lows – Cramer and four others on what to expect

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U.S. stocks dropped sharply Tuesday after a historic sell-off hit oil markets.

Five experts weigh in on what investors should watch.

John Kilduff, founding partner at Again Capital, said cuts in the U.S. should improve the situation.

"I can tell you here in the U.S., the cutbacks are real and significant. I mean you could argue that the U.S. has already cut 700,000 barrels of production. We were at 13.1 [million] a few weeks ago, we're at 12.4 as of last week's report, we'll see where we are [Wednesday] when the Department of Energy issues its weekly report then. I would expect the further decline."

Jim Cramer, host of CNBC's "Mad Money," said the longer end of the curve – the July contract – might not be pricing in the supply-demand issues.

"I think the July contract shows too much enthusiasm, the June contract is probably a little bit more right. There were about 100,000 contracts that traded at that minus $37 price. That's a lot of oil when you consider that each contract is a thousand barrels."

Sadad Al-Husseini, owner of Husseini Energy Co., said demand issues were clear in the data.

"The signs were all there that the demand had collapsed, particularly in the U.S. where the WTI finds its home, refinery runs we're down to 70%, 69% as of early April. The demand for gasoline was down from 9.5 to five million barrels from a month ago, jet fuel was down from 1.6 to 0.5 so everything demand wise was down in the U.S., and I couldn't see how the April contract could have held out, because there just wasn't any more demand for that oil, and they had to get rid of it."

Rob Thummel, portfolio manager at Tortoise, sees opportunity in some energy names.

"For dividend stocks, our focus is on midstream and these companies are resilient, they actually generate their cash by the volumes that are transported through the pipeline and don't have the commodity price exposure so for investors looking for dividend-paying stocks, we really encourage you to look at midstream stocks. … These are companies that have been around a long time and have sustainable cash flows even in this market environment and can sustain dividend yields that are that are pretty high right now."

Heath Tarbert, chairman of the Commodity Futures Trading Commission, said volatility will continue.

"I think we're going to continue to see volatility as those key inputs that I mentioned earlier on the supply side — both the actual availability of supply and then the storage cost as well as the question as to when the economy will open — all of those will continue to drive the futures price as well as the spot market price. And I think as a result if there continues to be uncertainty on any one of those three factors and all of them combined, we'll continue to see volatility."

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1 Comment
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