Hurricane Ike takes aim at refining hub

HOUSTON (Reuters) - Energy companies shut down more than 11 percent of U.S. fuel production capacity along the Gulf Coast on Thursday as a precaution ahead of Hurricane Ike, a powerful storm forecast to hit the coast west of Houston by the weekend.

The refinery shutdowns sparked widespread concern about possible fuel shortages in the storm's wake, driving a rally in Gulf Coast wholesale gasoline prices toward $5 a gallon that could trickle down to the pumps, traders said.

"We're talking about a major storm surge in the Galveston area which could cause some flooding and damage to refineries and the Gulf Coast is reacting to that in a very strong way," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.

Ike, packing winds of 100 mph (160 kph), was strengthening over the Gulf of Mexico Thursday and was expected to make landfall by Friday night or Saturday morning, causing thousands of people to flee coastal areas along the Texas coast.

The storm could cause a storm surge of 10 to 15 feet, posing a risk of damage to refineries in Galveston Bay and Texas City, said Jim Rouiller, a meteorologist with private weather forecaster Planalytics.

Already, nine refineries along the Gulf Coast have shut down their operations as a precaution, accounting for 2 million barrels per day or more than 11 percent of the nation's fuel production capacity.

The U.S. energy sector has already been forced to evacuate workers and batten down refineries at least four times so far this summer due to storms that have pushed into the Gulf of Mexico, starting with Hurricane Dolly in mid-July.

Offshore, oil companies, still reeling from the impact of Hurricane Gustav more than a week ago, have already shut more than 95 percent of their oil production and more than 73 percent of their natural gas output, according to the latest data from the Minerals Management Service.

The Gulf is home to a quarter of U.S. crude oil production and 15 percent of U.S. natural gas production.

Meanwhile, the Louisiana Offshore Oil Port stopped offloading tankers and the Coast Guard shut down inbound traffic on the Houston Shipping Channel -- choking off important conduits for imports.

Production from the offshore region was expected to recover fairly quickly, however, as Ike's path took it far enough south and west to reduce the risk of damage.

"This forecast will leave the high-density area and the 'heart of the energy production area' across southern Louisiana and adjacent portions of the northern Gulf away from the damaging wrath of Ike. As a result, I expect operations to ramp up across this large portion of the Energy Production early next week," said Rouiller.

Even so, the impact of Gustav and Ike on U.S. energy production has already been heavy, carving out some 14.1 million barrels of crude output, 67.9 billion cubic feet of gas output, and roughly 16 million barrels of refining output, according to a Reuters survey.

(Reporting by Janet McGurty and Richard Valdmanis in New York, Erwin Seba in Houston, editing by Matthew Lewis)