Hurricane Dolly shuts some Gulf oil and gas output

By Erwin Seba

HOUSTON (Reuters) - U.S. Gulf of Mexico producers shut 5 percent of oil and natural gas production by Tuesday ahead of the first storm to menace energy production areas, but the shutdowns were expected to be short-lived even as Dolly strengthened to a hurricane.

"Dolly is a short-term sidebar," said Tim Evans, energy analyst for Citi Futures Perspective in New York. "We're talking about a very modest amount of production."

U.S. crude oil futures settled down $3.09 at $127.95 a barrel, bouncing back from a six-week low of $125.63 after the U.S. Minerals Management Service announced the production shut-ins.

Dolly became the second hurricane of the 2008 Atlantic season with sustained winds of nearly 75 miles per hour (120 km per hour). It's expected to make landfall on Wednesday afternoon near the Texas border town of Brownsville, well away from the most sensitive offshore platforms.

Anadarko Petroleum said it had restored the equivalent of 10,000 barrels per day of oil production in the western Gulf of Mexico due to the fading threat from Dolly.

The company still had the equivalent of 20,000 barrels of oil production shut, an Anadarko spokesman said.

By the numbers, Dolly led producers to turn off 395 million cubic feet per day (mmcfd) in natural gas production out of a total of 7.7 billion cubic feet per day and 60,631 barrels of crude oil output out of 1.3 million barrels taken daily from the Gulf, according to the MMS.

Announcements throughout the day from pipeline operator Williams, producers Apache along with energy giants Exxon Mobil, Chevron and Shell Oil pointed to Dolly making a bigger dent in the Gulf's natural gas output.