UPDATE 3-US Gulf oil output at a trickle ahead of Gustav

(Updates with oil prices, NYMEX natgas force majeure)

By Erwin Seba

HOUSTON, Aug 31 (Reuters) - U.S. energy companies shut nearly all offshore oil production and were racing to bring down flood-prone Louisiana refineries on Sunday ahead of Hurricane Gustav's landfall, which could rival the wrath of 2005's Hurricane Katrina.

Gustav is expected to be a Category 3 hurricane with wind speeds up 127 mph (204 kmh) when it hits the Louisiana coast on Monday in the first major test of the U.S. energy industry's preparedness since the devastating 2005 hurricane season.

Over 96 percent of U.S. Gulf oil production and 82 percent of natural gas output had been closed as of Sunday afternoon, the U.S. Minerals Management Service said.

The Gulf normally pumps 1.3 million barrels per day (bpd) of oil, a quarter of all U.S. production, and 7.4 billion cubic feet of natural gas, about 15 percent of domestic output.

At least nine refineries with a combined capacity of 2.2 million bpd, or 12.5 percent of U.S. refining capacity, were being shut along the south Louisiana coast ahead of Gustav's projected arrival west of New Orleans on Monday.

Other refineries were reducing processing rates and further shutdowns were possible.

Hurricanes Katrina and Rita wrecked more than 100 oil platforms in 2005, shutting down a quarter of U.S. oil production and closing several large refineries for months. Analysts have warned Gustav could deal a harsher blow and potentially send oil prices up $10 a barrel or more.

The New York Mercantile Exchange opened its electronic trading platform earlier than normal on Sunday to allow traders to adjust positions ahead of the arrival of the hurricane.

U.S. crude oil futures were up $1.70 at $117.16 a barrel as of 2035 GMT after rising as much as $3.14.

"This could be potentially the most dangerous storm for the energy sector we've ever seen, said Chris Jarvis, senior analyst at Caprock Risk Management in Hampton Falls, New Hampshire. "It is going right across the most important areas."

Others took an optimistic view of the widespread shutdowns Sunday.

"This is Katrina's legacy," said Phil Flynn of Alaron Trading in Chicago. "The industry is much more prepared and taking things much more seriously. That's why so much has been shut down so quickly.

INFRASTRUCTURE CLOSURES

In addition to closing oil and gas fields and refineries, energy companies were also shutting down important fuel transportation systems.