Storm Dolly threat shuts some oil, gas output

HOUSTON (Reuters) - Gulf of Mexico producers began shutting oil and natural gas output from offshore on Tuesday ahead of Tropical Storm Dolly, which is expected to hit the U.S.-Mexican border on Wednesday.

At one point, U.S. crude oil futures fell over $5 a barrel to a six-week low as forecasters expected Dolly to miss major oil and gas installations.

However, Dolly, which is expected to become a hurricane before hitting land, could put a dent in natural gas supplies from offshore platforms. Pipeline operator Williams said its giant Transco pipeline system would be carrying 250 million cubic feet less in natural gas due to Gulf shut-ins.

Producer Apache Corp said it shut 56 million cubic feet in natural gas production from seven fields in the western Gulf of Mexico along with a small amount of oil output.

Energy giant Exxon Mobil Corp said it shut 10,000 barrels per day (bpd) of oil output and 40 million cubic feet per day in natural gas production. Producer Anadarko Petroleum Corp said it had shut the equivalent of 30,000 bpd of oil production in the western Gulf of Mexico.

That's a fraction of Gulf production which provides 1.3 million barrels of oil or one-quarter of U.S. production and 7.7 billion cubic feet or 15 percent of U.S. natural gas output.

Producers including BP Plc, Chevron Corp and Shell Oil Co said they were flying workers from Gulf platforms, but output was unaffected.

While Dolly's path will take the threat away from the heaviest offshore production areas, the storm still poses a potential threat to three refineries in Corpus Christi, Texas.

Valero Energy Corp and Citgo Petroleum Corp said they were monitoring the storm and readying the refineries, but production remained as before the forecast.

Flint Hills Resources LP said it was monitoring Dolly.

While the 2006 and 2007 hurricane seasons had little impact on offshore production areas, the companies have prepared for a possible repeat of 2005 when hurricanes Katrina and Rita temporarily shut a quarter of U.S. oil and fuel production, sending prices to record highs.

(Reporting by Erwin Seba and Bruce Nichols in Houston; Janet McGurty, Rebekah Kebede and Joe Silha in New York; Editing by Marguerita Choy)