Hurricane Alex spins past oil rigs toward Mexico

PLAYA BAGDAD, Mexico (Reuters) - Hurricane Alex picked up strength in the Gulf of Mexico as it headed for land on Wednesday, flooding parts of the Mexican coast but staying clear of oil fields to the relief of crude markets.

The first named storm of the 2010 Atlantic season, Alex's winds of 85 mph (135 kph) bent over palm trees near the port city of Matamoros across from Brownsville, Texas, while its rains swamped beaches. Soaked Mexican marines in towns in Tamaulipas state ushered residents and fisherman into shelters as 10-foot (3-metre)-high waves slammed into the shore.

"We're getting out of here, this looks really ugly," said a 50-year-old housewife who gave her name as Juana as she packed belongings into a truck in the beach town of Playa Bagdad.

Alex looked set to grow into a robust Category 2 storm as it slams into Tamaulipas later on Wednesday then weaken back to a storm on Thursday, but its rains had already flooded highways as far inland as the industrial city of Monterrey.

In addition to hampering efforts to control the massive BP Plc oil spill off the Louisiana coast, Alex forced oil and gas companies to cut back production, but the hurricane remained on a steady course well southwest of major U.S. offshore facilities.

Oil prices have fallen since Friday as Alex's path churned away from U.S. oil fields, but energy companies still shut down production of more than 421,000 barrels per day of oil, about a quarter of the Gulf's output, as a precaution.

They have also shut 919 million cubic feet per day of gas output, some 14 percent of the Gulf's total."

Mexican state oil monopoly Pemex has kept its oil platforms, which are farther south in the Gulf, operating since Alex formed, and the government on Wednesday reopened the Gulf ports of Cayo Arcas and Dos Bocas, which ship about 80 percent of Mexico's crude exports, as Alex moved on. The ports had been closed since Sunday.

Alex will likely start weakening as it hits land, the U.S. National Hurricane Centre said at 2 p.m. EDT (1800 GMT).

Alex was located about 130 miles (210 km) south-southeast of Brownsville, and moving northwest at 12 mph (18 kph), the Miami-based hurricane centre said.

"The centre of Alex will probably make landfall in northeastern Mexico within the hurricane warning area late tonight or early Thursday morning," it said.

OIL CLEANUP HAMPERED

Despite 7-foot (2.1-metre) seas and winds gusting to 25 mph (40 kph) at the site of the BP leak, crews continued to capture oil and drill relief wells. Efforts to burn off and skim spilt oil and spray dispersants had to be suspended. Officials said oil capturing and drilling would have to stop if the winds reach 46 mph (74 kph).

Houston Ship Channel traffic was halted due to rough seas from Alex, the U.S. Coast Guard said on Wednesday. Tankers on the channel provide crude oil to eight refineries in Houston and Texas City, Texas. The refineries account for more than 10 percent of U.S. refining capacity.

Forecasters expect Alex to drench Tamaulipas and southern Texas with 6 to 12 inches (15 to 30 cm) of rain, risking flooding, and drive dangerous storm surges along the coast.

Texas Governor Rick Perry authorized deploying up to 2,500 state military personnel to help with storm preparation and response. Transport officials in the Rio Grande Valley monitored evacuation routes and storm shelters and mobile feeding canteens and kitchens were prepared.

A hurricane warning was issued for the coast of Texas south of Baffin Bay down to the mouth of the Rio Grande, and along the coast of Mexico to La Cruz. A tropical storm warning extended down to Cabo Rojo, south of the port city of Tampico.

Officials in South Texas readied rescue vehicles and shelter and rushed supplies to the Rio Grande Valley. Bob Pinkerton, mayor of South Padre Island, a coastal community and tourist draw, urged residents and visitors to leave.

The Atlantic hurricane season runs from June 1 to November 30 and meteorologists predict an active season this year. Alex is the first June storm in 15 years to gain hurricane strength in the Atlantic.

(Additional reporting by Cyntia Barrera and Patrick Rucker in Mexico City, Robin Emmott in Monterrey, and Anna Driver in Houston; editing by Mohammad Zargham)