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Sector Trade: Nat Gas

Friday, 2 Oct 2009 | 5:55 PM ET

Traders are trying to get a handle on nat gas as they weigh record inventories against the potential of an early cold snap.

Natural gas futures climbed on Friday despite word that supplies have hit an all-time high of 3.589 trillion cubic feet earlier.

One of the coolest summers in 10 years, a deep recession that sharply cut industrial demand and strong gas production, particularly earlier in the year, helped drive inventories to record highs.

But the threat of an early cold snap now has speculators driving up the price. But perhaps not for long.

"You need a (cold) winter like we haven't seen in a long time, and you probably need the economy to kick in a bit too in order to pull all this gas out (of storage)," says Tom Saal, senior vice president at Hencorp Futures in Miami.

"If we don't get a very cold winter as advertised, prices will plunge," Saal says, adding futures prices could slide back to $3 or $3.50 without a decent heating season.

What’s the trade?

If you want to play the space I'd do it with Apache or Chesapeake , counsels Karen Finerman. But I would not do it with the UNG .

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Trader disclosure: On October 2, 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), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Najarian Owns (C) Calls; Najarian Owns (FFIV) Call Spread; Najarian Owns (GE) Calls; Najarian Owns (JPM) And Is Short (JPM) Calls; Najarian Owns (INTC) And Is Short (INTC) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Calls; Najarian Owns (PEP) Call Spread; Najarian Owns (WFC) Put Spread; Najarian Owns (YHOO) Call Spread; Finerman's Firm Owns (CSCO), (MSFT), (USO); Finerma's Firm And Finerman Own (WFC) Preferred Shares; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (UNG); Finerman's Firm Owns (BDX); Finerman's Firm Is Short (TLT); Finerman's Firm Owns (BAC), (BAC) Calls, (BAC) Preferred; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (WMT); Finerman's Firm Is Short (XRT); Finerman's Firm Is Short (BWA); Finerman's Firm Is Short (USO); Seymour Owns (ABV); Seygem Asset Management Is Short (PBR); Seymour Owns (EWZ); Seygem Asset Management Owns Lukoil Shares

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UNG
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