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Natural Gas: Time to Short or Not Just Yet?

Top In for Natural Gas

Natural gas shot up 20 percent in the first quarter, its fourth straight quarterly gain, begging the question — can this hot streak continue?

The second quarter is typically tough for natural gas because it's "between seasons," meaning the fuel is no long used to heat homes, but it's not used to cool homes yet either, cautioned trader Anthony Grisanti.

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"I think in the summer, it does definitely go over $4, but I think there's a window of opportunity in this second quarter where you can short this right now and I think it's a little overdone by the upside," said Grisanti, adding falling inventory numbers have also been driving nat gas prices.

A report by the U.S. Energy Information Administration on Thursday showed total domestic gas inventories fell last week by 95 billion cubic feet to 1.781 trillion cubic feet.

"We had a colder winter than last year. We had a big oversupply in the market and now we've gotten rid of 20 percent of that oversupply. In fact, we've used 20 percent more natural gas this year than last," said Grisanti, founder of GRZ Energy. "We've gotten rid of that oversupply and that's what's driven the market."

Men work on a natural gas valve at a hydraulic fracturing site in South Montrose, Pa.
Getty Images

To trade it, Grisanti plans to sell the May natural gas futures contract at $4.10 with a target of $3.90 and a stop at $4.21.

(Watch: What's a Futures Contract? Pro Explains)

From the Chicago Mercantile Exchange, pro trader Rich Ilczyszyn argued Grisanti's timing is a bit too early.

"We're still seasonally strong, according to the calculator, until the first week of April. We may pop a little higher," said Ilczyszyn, adding the charts still look strong, so he would wait before putting on Grisanti's trade.

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— By CNBC's Drew Sandholm with Reuters and additional reporting from CNBC's Giovanny Moreano

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