* About 70 pct of East Coast refinery capacity shut or shutting * Colonial Pipeline, conduit for Gulf oil products, shuts lines * Gasoline, heating oil futures rise By Janet McGurty NEW YORK, Oct 29 (Reuters) - The supply of gasoline, diesel and jet fuel into the U.S. East Coast ground almost to a halt on Monday as Hurricane Sandy forced the closure of two-thirds of the region's refineries, its biggest pipeline, and most major ports. Benchmark New York Harbor gasoline futures jumped as much as 11 cents a gallon As traders feared that power outages and flooding could leave refiners struggling to restore operations after the broadest storm ever to hit the United States. Prices later pared gains to close 2 percent higher. With Sandy gaining strength as it nears the coast, refinery, pipeline, port and terminal operators shuttered or reduced operations, increasing the risk that bottlenecks would keep supplies of motor and heating fuel from reaching customers. "Given the recent tightness of supplies in New York Harbor, this weather event is only likely to perpetuate strength in gasoline prices," BNP Paribas oil analysts Harry Tchilinguirian and Gareth Lewis-Davies said in a research note. "Lost distillate (heating oil and diesel) output in turn will act to depress inventories further." Colonial Pipeline, the nation's largest oil products pipeline that connects the East Coast to Gulf Coast refiners, is set to close its main line up to Philadelphia and New York City by Monday evening, as expected, halting delivery of up to 15 percent of the region's fuel demand. Nearly 70 percent of the region's refining capacity was on track to be idled. Phillips 66 confirmed it had completely shut the 238,000-bpd Bayway, New Jersey, refinery, the area's second-larget plant, known as the "gasoline machine" for its key role supplying motor fuel to the New York City area. Philadelphia Energy Solutions began the precautionary closure of key units at its 330,000 barrel-per-day (bpd) Philadelphia refinery, the biggest in the region. "Many of the process units have been shut down, others are in 'standby,' and the remainder have been brought to their minimum safe operating levels," said Cherice Corley, a spokeswoman for the refiner. Gasoline prices rose and crude oil fell as traders factored in a supply squeeze, although some analysts said the storm would also cut heavily into oil demand in the densely populated region, with most people avoiding driving and airlines grounded during the storm. Benchmark U.S. gasoline futures closed up 6 cents at $2.75 a gallon, paring gains slightly after initially jumping as much as 11 cents. Heating oil gained 1 percent to $3.12 a gallon in thin trading on the New York Mercantile Exchange's (NYMEX) electronic platform. While oil futures continued to trade electronically, the NYMEX's open-outcry trading floor was shut due to mandatory evacuations of low-lying areas around Manhattan's southern tip. LOW HEATING OIL STOCKS The storm comes as low inventories of refined products, especially distillates and heating oil, have stirred concerns of potential price spikes during the winter heating season. The East Coast of the United States consumed almost 5.3 million bpd of refined products last year, according to the Energy Information Administration (EIA). Local refineries supplied two-thirds of that, while 30 percent came via pipeline from refineries around the Gulf Coast and Midwest, with the balance made up by imports. "Most of the gasoline and other fuels used in the region are supplied from refineries on the Gulf Coast, or by international suppliers" said Roger Ihne, principal in the oil and gas practice at consultancy Deloitte. "The distribution infrastructure, including pipelines and refined product terminals, are extremely important and could hamper recovery efforts if significant amounts of this infrastructure is damaged." Sandy, forecast to come ashore late Monday as one of the strongest storms ever to hit the area, grew slightly stronger throughout the day, with wind speeds up to a maximum of 90 miles per hour, 15 mph faster than Sunday. The center of the storm was 55 miles (90 kms) east-southeast of Cape May, New Jersey, and its center was expected to reach the coast of southern New Jersey within the next three to five hours, the National Hurricane Center said in an advisory at 4 P.M. EDT (2000 GMT). WEIGHING THE RISKS The precautionary refinery closures are more widespread than during Hurricane Irene in August 2011, when only the Bayway plant shut completely. While refiners escaped any serious damage during that hurricane, many fear Sandy's massive storm surge - forecast to be as high as 11 feet (3.4 meters) - could breach plant defenses and cause damaging flooding, which can sometimes take weeks to repair. Abrupt power outages can also damage refinery equipment. PBF Energy has opted to reduce rates at its 180,000-bpd Paulsboro plant in southern New Jersey, which sources said earlier had been set to shut down. Paulsboro is across the Delaware River from the Philadelphia area. "We weighed the risks inherent in shutting down and restarting the refineries, and opted to run at reduced rates," PBF spokesman Michael Karlovich said in an email. Among other plants affected by shutdowns, Hess Corp said it was closing its 70,000-bpd refinery in Port Reading, New Jersey. Delta Air Lines' 185,000-bpd Monroe Energy plant in Trainer, Pennsylvania, was monitoring the storm. "We are taking it hour to hour," a source said. NuStar Energy and Magellan Midstream Partners , two of the biggest players in the nation's pipeline and storage terminal business, also shut terminals along the East Coast. Brent crude futures for December delivery slipped 11 cents, or 0.1 percent, to $109.44 a barrel, after hitting an intraday low of $108.51, down $1.04. Brent lost 0.5 percent last week. U.S. crude fell 74 cents to $85.54 a barrel.