Hurricane Ike takes aim at U.S. refining hub

By Erwin Seba

HOUSTON (Reuters) - Hurricane Ike took aim at the heart of the U.S. refining sector on Thursday, forcing shut more than 16 percent of U.S. fuel production and sparking worries of fuel shortages in the storm's wake.

Ike, packing winds of 100 miles per hour (160 km per hour), already has left offshore oil and gas production in the Gulf of Mexico nearly paralyzed. Its track would take it just west of the Houston energy hub by Saturday morning.

"The worst-case scenario for the hurricane season is what we're looking at with Ike," said Chris Jarvis, senior analyst, Caprock Risk Management, New Hampshire. "This is the one area that is very much the Achilles' heel of the energy complex."

U.S. crude oil settled down $1.71 at $100.87 a barrel on a stronger U.S. dollar and weakening global demand. NYMEX October RBOB gasoline futures rose 8.72 cents to settle at $2.7488 a gallon amid refinery shutdowns.

Some 11 refineries have shut operations ahead of Ike, accounting for 2.8 million barrels per day or more than 16 percent of U.S. fuel production capacity.

Experts said storm damage could leave some coastal refineries shut for weeks.

"Based on the size and projected strength of Ike, I fear the potential exists for a massive storm surge ranging from 10 to 15 feet, maybe higher, along with heavy wave action that will inundate and severely damage the huge refinery complex across Galveston Bay and Texas City," said Jim Rouiller, meteorologist for private forecaster Planalytics.

Gulf Coast wholesale gasoline prices spiked more than a dollar to near $5 a gallon on Thursday morning on fears the hurricane could lead to fuel shortages.