May 24 (Bloomberg) -- New York natural-gas futures surged to the highest in more than four months as hot weather from the East Coast to Texas boosts demand from gas-fired power generators to run air conditioners.

New York is expecting a high of 85 degrees Fahrenheit (29 Celsius) today, 11 degrees above normal, and Houston is expecting highs in the lower 90s all week, the National Weather Service said. Houston's normal high is 88 degrees. Demand for gas from power plants peaks during the summer months.

``We're starting to look ahead to some hot weather, so the market's got a couple of factors of it's own,'' said Peter Beutel, president of New Canaan, Connecticut, energy consultant Cameron Hanover Inc.

Gas for June delivery rose 35.2 cents, or 5.5 percent, to $6.705 per million British thermal units on the New York Mercantile Exchange. It was the biggest one-day gain since May 3. Gas is up 14 percent this month to the highest price since Jan. 12.

The futures were poised to fall in electronic trading that began at 3:15 p.m. after the 10-minute relative strength index rose above 70 around 2:07 p.m., a bearish signal to chartists. An index reading above 70 suggests prices are at a level that will prompt selling.

Hot Weather

Above-normal temperatures are expected from May 29 to June 2 from the Mid-Atlantic and eastern Great Lakes south, and as far west as Texas, private forecaster Earth Satellite Corp. said.

Over the next week, the hot weather should ease over the Northeast, while cooling demand in the south-central U.S. will be 30 to 40 percent above normal, according to Belton, Missouri- based Weather Derivatives.

Hot weather in the Southeast forced the Florida Gas Transmission Co. to issue an ``overage alert'' telling shippers to monitor their supplies of natural gas on the 5,000-mile pipeline system stretching from Texas to south Florida.

Natural-gas pipelines must have specific levels of supplies to maintain pressure. Periods of high demand can endanger the pressure levels.

``Temperatures are increasing'' in the regions serviced by the pipeline, and ``demand is increasing,'' the pipeline said in a notice posted on its Web site. The pipeline can transport up to 2.1 billion cubic feet of gas a day.

Natural gas produced offshore at Royal Dutch/Shell Group's MARS platform also was halted over the weekend after a leak was found. The Gulf of Mexico platform produces 170 million cubic feet of gas a day, spokesman Fred Palmer said. The company will know more about how long the platform will be down later today, he said.

Options Pressure

Options, which provide the right but not the obligation to buy or sell natural-gas contracts, expire tomorrow. That may be lending incentive to traders, said Marshall Steeves, an analyst with Refco Group Ltd. in New York.

Buying accelerated in early trading as the price topped $6.50 per million Btu, a level at which trading was clustered around June call options, which confer the right to buy futures at a pre-set price. The Next cluster is at 6.75, according to Bloomberg data.

``The $6.75 is definitely a draw, an opportunity,'' Steeves said. ``Some people have even gone out on a limb at the $7 calls.''

Gas prices have rallied 32 percent over the past three months, partly because a similar rally in oil raised prices for competing factory fuels. Natural gas and oil-based products compete in 5 to 10 percent of U.S. factories and utilities.

Crude oil was up $1.79 to $41.72 a barrel on the exchange. Traders were concerned that a promise by Saudi Arabia to boost production would be insufficient to meet rising global demand.

To contact the reporter on this story:
Jim Kennett in Houston at jkennett@bloomberg.net

To contact the editor of this story:
Robert Dieterich at rdieterich@Bloomberg.net.

Last Updated: May 24, 2004 15:14 EDT