NEW YORK (Dow Jones)--Natural gas futures soared Monday, driven by predictions that the market has reached a floor and the approach of the winter heating season.

Natural gas for October delivery on the New York Mercantile Exchange settled 33.7 cents, or 11.4%, higher at $3.297 a million British thermal units after reaching a high of $3.375/MMBtu earlier in the day.

Gas traders, who have been betting heavily on falling prices over the past several months, have rushed to buy back previously sold contracts after the market reached a fresh seven-and-a-half-year low in early September. Spurts of bargain-buying have usually been followed by sell-offs the following day, creating wild price fluctuations.

Traders have been trying to gauge whether oversupply will continue to depress prices, or whether a cold winter, low levels of production and hints of economic recovery will send prices rallying in the coming months. Gas prices often rise in September as traders look ahead to the winter, when demand for the fuel rises as gas is used to heat homes and businesses.

"We're rebounding off of Friday's price decline," said Pax Saunders, an analyst with Gelber & Associates, a Houston energy advisory firm. "I think the market's now stalling here and looking for its next meaningful peak."

But tepid demand, an overabundance of gas and increasingly mild weather as fall approaches continue to place downward pressure on gas prices. Industrial gas consumers have sharply curtailed their use of the fuel during the economic downturn.

Total gas in U.S. storage as of Sept. 4 was 3.392 trillion cubic feet, about 17% above both the five-year average and last year's level.

"With weather conditions still moderate around the country and industrial demand still severely constricted, prices will not be able to rally too far in the near term," wrote Mike Fitzpatrick, a broker with MF Global in New York, in a note to clients Monday.

Moderate fall temperatures as fall arrives are likely to limit the demand for natural gas for heating and cooling, further adding to the supply gas glut. Meteorologists were predicting mostly normal temperatures across the eastern two-thirds of the U.S. through Oct. 14.

Next week, the "weather pattern will maintain an overall trend toward seasonably hot temperatures across the West, below-normal temperatures from the Rockies eastward across the Plains and a seasonably mild temperature regime along with stormy weather from the Gulf coastal region northward to New England," wrote Jim Rouiller, a meteorologist with private forecaster Planalytics Inc. in Wayne, Pa., in a note to clients Monday.


FUTURES SETTLEMENT NET CHANGE
Nymex Oct $3.297 +33.7c
Nymex Nov $4.324 +31.3c
Nymex Dec $4.992 +22.3c

CASH HUB RANGE PREVIOUS DAY
Henry Hub $2.73-$3.03 $2.89-$3.06
Transco 65 $2.76-$3.00 $2.92-$3.00
Tex East M3 $2.99-$3.29 $3.05-$3.21
Transco Z6 $2.99-$3.23 $3.06-$3.21
SoCal $3.00-$3.25 $3.03-$3.19
El Paso Perm $2.84-$3.00 $2.88-$2.96
El Paso SJ $2.82-$2.92 $2.84-$2.94
Waha $2.82-$3.00 $2.90-$3.00
Katy $2.80-$3.04 $2.90-$3.03

-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com