Aug. 2 (Bloomberg) -- Natural gas prices jumped in the U.S., adding to a 40 percent rally in the past two weeks, as the hottest weather to hit New York since 2001 drove up demand for air conditioning.

New York City may reach 105 degrees Fahrenheit (41 Celsius), the National Weather Service said. Demand for air cooling will top normal by 42 percent in the Northeast through Aug. 8, according to Weather Derivatives in Belton, Missouri. Gas also rose as a tropical storm in the Caribbean headed for the U.S., where output was cut last year by hurricanes.

``We're seeing higher electricity demand because there is more need for air-conditioning,'' said Rory Stewart, an oil and gas analyst at Simmons & Co. International in London. ``The need for gas has risen as power demand goes up. Until we see the heat wave easing, we're going to see gas prices remaining high.''

Gas for September delivery rose as much as 92.6 cents, or 12.2 percent, to $8.50 per million British thermal units on the New York Mercantile Exchange. It was up 80.6 cents at $8.38 in electronic trading at 7:53 a.m. New York time. Prices surged more than 14 percent on July 31, before falling yesterday, erasing more than half of the gain.

The gas price has climbed 31 percent since July 25. Cooling needs will be 21 percent above average in the Southeast and 38 percent higher than normal in the northern Midwest, forecaster Weather Derivatives predicted.

``It is as hot as it gets,'' Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant, wrote in a report today. ``Forecasts suggest that the worst will be over by tomorrow.''

Last year, the highest temperature reached in New York City was 99 degrees, on Aug. 13, according to Meteorlogix LLC. It peaked in 2004 at 91 degrees, in June. Yesterday's high was 95 degrees.

Tropical Storm

Gas traders are watching Tropical Storm Chris, which may become a hurricane as soon as today. The storm was 65 miles north of the Caribbean island of St. Martin earlier today, and is expected to reach the Florida Keys by Monday morning, meaning it is still several days away from posing any threat to Gulf of Mexico rigs.

Energy prices sometimes rise on tropical systems if they are deemed a threat to offshore production.

Gas is the third-largest source of fuel for U.S. electricity generators, behind coal and nuclear, according to the Energy Department. Power demand peaks in summer as people turn up air conditioners, sparking higher demand for electricity from gas-fired power plants. The heat was projected to ease by the end of the week, curtailing demand.

Gas Storage

Prices can tumble quickly once gas needs are met, Beutel said.

``We saw this during the last heat wave -- once the buying for immediate needs was filled, the buying dried up and prices broke down sharply while the weather was still at its worst,'' he said.

Utilities and manufacturers put natural gas in underground storage caverns and reservoirs from April to November for use during the winter, when demand exceeds production and imports, because of heating needs.

The amount of gas in storage was 490 billion cubic feet higher than the average for the past five years, the most recent government data showed.

New York temperatures hadn't reached 100 degrees since August 2001, according to weather service data.

To contact the reporter on this story: Stephen Voss in London at sev@bloomberg.net

Last Updated: August 2, 2006 08:09 EDT