* Storm is no longer expected to become a hurricane
* Energy companies in U.S. Gulf halt production
By Jane Sutton
MIAMI, Oct 4 (Reuters) - Tropical Storm Karen weakened in the Gulf of Mexico on Friday after disrupting U.S. energy output on its way to drenching the coast from Louisiana to the Florida Panhandle, the U.S. National Hurricane Center said.
Karen's top winds dropped to 50 mph (85 kph), down from 65 mph (105 kph) a day earlier, and hurricane center forecasters in Miami said the hurricane watch would likely be downgraded to a tropical storm watch later in the day.
"It has become a little less likely that Karen will reach hurricane strength," the hurricane center said.
Energy companies in the Gulf shut down production and evacuated workers from offshore platforms as the storm approached a region that produces nearly a fifth of daily U.S. oil output and 6 percent of natural gas output.
Oil prices have been dropping amid concerns that a prolonged U.S. government shutdown would hurt demand, but oil futures rose on Friday as the storm in the Gulf curbed supply. Brent futures rose 55 cents to $109.55 a barrel in late morning.
Karen's projected path shifted slightly westward and it was expected to move ashore over Louisiana on Saturday night and into Mississippi on Sunday.
At midday Friday, the storm was centered about 250 miles (405 km) south-southwest of the mouth of the Mississippi River. It was moving north-northwest but was forecast to turn to the northeast as it crossed the coast.
At the Port of New Orleans, cargo operations continued normally but the harbor pilots who guide ships through the mouth of the Mississippi had ceased operations.
"No ships are coming in or out the mouth of the river," said port spokesman Matt Gresham, adding that skies were still sunny on Friday morning.
"It's a bluebird day in New Orleans, Chamber of Commerce weather. We don't expect those conditions to last," he said.
The governors of Louisiana, Mississippi and Florida declared states of emergency to speed storm preparations, and the Federal Emergency Management Agency recalled some furloughed workers to assist.
Coastal residents could start feeling the effects of Karen by Friday night. The storm was expected to dump up to 6 inches (15 cm) of rain in its path and to push a surge of seawater over the shoreline.
"The highest water will occur along the immediate coast near and to the east of where landfall occurs, where the surge will be accompanied by dangerous waves," the hurricane center said.
At Alabama's Grand Mariner Marina on Dog River and Mobile Bay, boaters were tying down the larger vessels with double ropes and putting the smaller ones on trailers to haul them up the river to sheltered coves.
"It's like New York City at lunch time here. We are really busy," said marina manager Steve Penny. "We are doing everything we can to make room for 4 to 6 feet of water. Anything we can move, we get out."
Marina workers were adding fuel to their 8,000-gallon (30,280-liter) tanks to weigh them down and keep them from floating away.
A hurricane watch was issued for the coast from Grand Isle, Louisiana, to Destin, Florida, alerting residents to expect hurricane conditions within 48 hours.
A tropical storm watch was in effect in Florida from Destin to Indian Pass and in Louisiana from west of Grand Isle to east of Morgan City. The watch area included metropolitan New Orleans, Lake Maurepas and Lake Pontchartrain. Tropical storms carry winds of 39 mph to 73 mph (63 kph to 118 kph).
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