Most U.S. Gulf oil output shut as Gustav threatens

By Erwin Seba

HOUSTON (Reuters) - Energy companies shut down three-quarters of U.S. Gulf of Mexico oil production on Saturday to prepare for the worst hurricane to hit the U.S. oil patch since 2005 and coastal refineries began shutting down before possible flooding.

Hurricane Gustav, now a dangerous Category 4 storm, roared toward the Cuban mainland on Saturday with 150-mph (240-kph) winds on its way to the oil-rich Gulf of Mexico after a deadly pass through the Caribbean.

According to the U.S. Minerals Management Service, 76.8 percent of the Gulf's crude oil production and 37 percent of its natural gas output was closed.

Forecasters predicted Gustav would cross the Gulf of Mexico and hit central Louisiana on late Monday or early Tuesday with a force similar to that of Hurricane Katrina in 2005.

"This storm will be more dangerous than Katrina," said Planalytics analyst Jim Roullier. "I think this storm will prove to be a worse-case scenario for the production region."

Catastrophe risk experts Risk Management Solutions said damage to offshore energy facilities during Gustav could reach the level seen during the 2005 storms.

If Tropical Storm Hanna, now in the Atlantic, follows Gustav into the offshore production areas, crude oil prices could soar.

"You'll get all this money that will come back into the energy markets again," said Planalytics analyst Paul Corby. Gustav could add $10 a barrel to oil prices, Corby said.