By Robin Emmott
MONTERREY, Mexico (Reuters) - Hurricane Alex weakened to a tropical storm on Thursday as it moved across north-eastern Mexico, dumping heavy rain that flooded a major city as U.S. companies began to restart halted oil production.
The first named storm of the 2010 Atlantic season was powerful enough to drench the industrial city of Monterrey well inland from the coast, killing three people, washing away chunks of surrounding highways and turning dry desert beds into turbulent rivers.
Flood waters in Monterrey swept some zoo animals including buffalo from their pens, and efforts to round them up were delayed by the storm conditions. Floods sucked a 12-tonne statue of Mexico's revered Virgin of Guadalupe off its perch on the bank of the city's normally dry Santa Catarina river.
"The damage is enormous. A river burst its banks and we have people trapped on the roofs of their houses," said Mayor Martin Zamarripa of the town of Hualahuises, outside Monterrey.
Tens of thousands of residents were without water and electricity and more than 4,000 people were moved to shelters in the city 140 miles (230 kms) south of McAllen, Texas.
South Texas escaped much of the storm, but Alex flooded about 80 percent of the port city of Matamoros across from Brownsville, sent uprooted trees crashing down on parked cars and forced thousands to flee low-lying fishing villages.
"These rains could cause life-threatening flash floods," the U.S. National Hurricane Centre said at 4 p.m. CDT (2100 GMT)
Alex made landfall as a Category 2 Hurricane on the Tamaulipas coast around 9 p.m. CDT on Wednesday (0200 GMT Thursday).
U.S. oil installations have not been hit by the storm, which formed near the Yucatan peninsula on Saturday, and oil companies began to ramp up production again after shutting down about a quarter of the Gulf's output as a precaution.
Companies had reported 342,224 barrels per day in oil production and 877 million cubic feet in gas output were shut.
The shut-in totals were down from the Wednesday peak of 26.3 percent, or 421,350 bpd of oil, and 14.4 percent of gas, or 919 Mmcf of gas.
BP Plc said on Thursday the passage of Alex slowed oil clean-up and containment efforts at its leaking deep-sea well off the Louisiana coast. BP said its Gulf oil and gas output was back to normal.
As the oil industry came back to life in the Gulf, ship traffic resumed at Houston and Corpus Christi, Texas, the U.S. Coast Guard said.
Alex, which is expected to dissipate over Mexico's central mountains overnight, had maximum sustained winds of 40 mph (65 kph) and was located about 95 miles (155 kms) east-northeast of Zacatecas in central Mexico on Thursday afternoon.
At least three tornadoes swept through the Brownsville area on Wednesday, tossing over tractor-trailers but causing no major damage. Alex was the first and strongest Category 2 hurricane to occur in the month of June since 1966.
Mexican marines evacuated thousands of people from fishing communities along the Gulf coast and into shelters, but some refused to leave their homes even as water ran in under doors.
Local authorities are on high alert in case of rainfall as high as 20 inches (50 cm). Alex killed a dozen people in Central America over the weekend.
(Additional reporting by Cyntia Barrera Diaz in Mexico City and Tomas Bravo in Matamoros; editing by Vicki Allen)
