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Amid Warm Weather, Where Will Natural Gas Go?

As balmy temperatures across the United States have damped December demand for heating oil and natural gas, one “Fast Money” analyst looked at what lies ahead.

“We’re very bearish on natural gas for all of 2012 and expect that it will be trading below $3 here very soon,” Tradition Energy analyst Addison Armstrong said Friday.

Natural gas inventories are 12 percent above normal, and they are expected to continue to grow into January, he said.

Armstrong said the latest government data shows that heating oil inventories are 16 percent below normal for this time of year and are at their lowest level for the week in at least the past six years.

Weather forecasts for early 2012 suggest continued warmer weather, but once temperatures plummet, heating oil prices will rally sharply, he said.

Commodities trader Dan Dicker said he would like to see “a little more excitement about the drilling of natural gas” to spur investment in the sector.

“That will drive the money into the natural gas space and make the trade a whole lot better, not just for natural gas itself but for the stocks around it,” he said. “If you wanted to make a big move in some space, you’re looking for natural gas to get exciting because those stocks have just been hammered and can really move up a big deal in 2012.”

Trader Steve Grasso again noted that Libya’s oil production was ramping up and suggested bargain-hunting in the entire space.

“It’s probably about six months away for nat gas to be a play on the buy side,” he said.

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Trader disclosure: On Dec. 23, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Weiss owns WLP; Weiss owns EUO; Weiss owns NIHD; Dicker owns CHK; Grasso owns ASTM; Grasso owns AVAV; Grasso owns BA; Grasso owns D; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns XLU; Najarian is long; Najarian is long MOS call spreads; Najarian is long AAPL call spreads; Najarian is long HSBC call spreads; Najarian is long VMW call spreads; Najarian is long CHS call spreads; Najarian is long RMBS call spreads; Najarian is long Long CIGX; Najarian is long CBOE; Najarian is long CME

For Steve Grasso
Stuart Frankel & its partners own CSCO

Stuart Frankel & its partners own CUBA

Stuart Frankel & its partners own GM

Stuart Frankel & its partners own GERN

Stuart Frankel & its partners own GM

Stuart Frankel & its partners own HPQ

Stuart Frankel & its partners own HSPO

Stuart Frankel & its partners own MSFT

Stuart Frankel & its partners own MU

Stuart Frankel & its partners own NEM

Stuart Frankel & its partners own NYX

Stuart Frankel & its partners own PRST

Stuart Frankel & its partners own RDC

Stuart Frankel & its partners own UAL

Stuart Frankel & its partners own XRX

For Brian Kelly
Shelter Harbor Capital is long KRE

Shelter Harbor Capital is long IWM

Shelter Harbor Capital is long ITUB

Shelter Harbor Capital is long BBD

Shelter Harbor Capital is short ESS

Shelter Harbor Capital is short CPT

Shelter Harbor Capital is short MAA

Shelter Harbor Capital is short UTX

Shelter Harbor Capital is short UBS

Shelter Harbor Capital is short CS

Shelter Harbor Capital is short BCS

Shelter Harbor Capital is short BRITISH POUND

Shelter Harbor Capital is short YEN

Shelter Harbor Capital is short SWISS FRANC

For George Davis
No disclosures

For Tim Winter
AMERICAN WATER WORKS CO INC I, Timothy Winter, CFA hereby certify that the views expressed in this report accurately reflect the analyst's personal views about the subject companies and their securities. I have not been, and will not be receiving direct or indirect compensation for expressing the specific recommendation or view in this report. Our affiliates beneficially own on behalf of their investment advisory clients or otherwise less than 1% of the common stock of AMERICAN WATER WORKS CO INC as of October 31, 2011.

For Edward Williams
ATVI – BMO Capital Markets makes a market in this security

ERTS - BMO Capital Markets makes a market in this security.

GME - BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months. This issuer is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO CM Ltd. or an affiliate within the past 12 months: Non-Securities Related Services.

For Taposh Bari
Jefferies & Company, Inc makes a market in the securities or ADRs of Finish Line.

For Jeff Fidacaro
SFG is a market maker in the securities of Apple Inc. (AAPL).

SFG and/or its affiliates beneficially own 1% or more of the securities of Apple Inc. (AAPL)

Susquehanna International Group, LLP (SIG) is comprised of a number of trading and investment related entities under common control, including Susquehanna Financial

Group, LLLP (SFG). SIG, its affiliates and/or its principals may have long or short positions in securities or related issues mentioned here. SIG, in its capacity as specialist and/or market maker may execute orders on a principal basis in the subject securities. Information presented is from sources believed to be reliable, but is not guaranteed to be accurate or complete. Past performance should not be taken as an indication or guarantee of future results. Hyperlinks provided in this report are for your convenience. Please be aware that the products and information supplied on these hyperlinked pages are not endorsed or approved by SFG.

For Paul Walsh
No disclosures

For Addison Armstrong
No disclosures

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