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NEW YORK (CNNMoney.com) -- The world oil market's reaction to the gathering threat of Hurricane Gustav will be put to the test in a special trading session on Sunday afternoon.
Electronic trading will begin several hours early at 2:30 p.m. ET, according to the CME Group, which runs the New York Mercantile Exchange and Globex electronic trading system.
This is the first time that NYMEX has extended trading for an emergency.
"We wanted to provide [traders] with the opportunity to respond to the storm's potential impact to energy markets as quickly as possible," said Bryan Durkin, chief operating officer of CME Group, which runs the NYMEX.
Electronic trading on Sunday normally begins at 6 p.m. ET, coinciding with trading in Asia. Floor trading in New York will remain closed as scheduled on Sunday. Monday's trading will continue as scheduled: Floor trading closed for Labor Day but investors able to trade electronically throughout the day.
"In times of emergency, it is very important to have the markets opened," said Esa Ramasamy, director of market reporting for energy buttstuffysis group Platts. "People need to protect their positions if they're exposed to market changes."
Gustav, a Category 3 storm after raking through Cuba on Saturday, is expected to strengthen as it gets closer to the U.S. coast. Forecasters predict it will touch land as early Monday.
On Friday, U.S. crude for October delivery fell 13 cents to settle at $115.46 a barrel. Prices rose as high as $118.76 during the day as Gustav bore down on the Gulf, but then pulled back as the dollar gained strength against the 15-nation euro - a move that typically pulls oil prices lower.
Major site of oil production
Facilities in the Gulf account for about 25% of U.S. oil production, pumping 1.3 million barrels of oil a day to refineries on the Gulf Coast. Offs platforms and pipelines buried in the sea bed are vulnerable to extreme storms such as hurricanes.
As of Sunday afternoon, 77% of oil production in the Gulf has been halted, according to Ramasamy. Oil companies such as Shell (RDSA) and BP (BP) said they were completing evacuations of their drilling personnel and many have completely shut down and secured their drilling platforms, the Associated Press reported.
Three years ago, Hurricanes Katrina and Rita devastated oil facilities before battering the Louisiana coast. The storms, which reached Category 5 strength before making landfall, destroyed 113 offs oil and natural gas platforms and damaged 457 pipelines in 2005. Since then, the oil industry has improved its safety measures, and believes it is better prepared for large storms entering the Gulf.
So far, about 15% of total U.S. refining capacity has already been shut down, according to Ramasamy. AP reported that Exxon Mobil (XOM, Fortune 500) and Valero (VLO, Fortune 500) have shut down refineries. Shell conformed it has shut down one refinery and is slowing production at others. Other smaller refiners have shut down locations in Louisiana, and AP reported that ConocoPhillips (COP, Fortune 500) is reducing its refining production in the region.
"That 15% looks small, but bear in mind that the U.S. is a huge country," Ramasamy said. "That's about 2.4 million barrels that have been lost, which would normally go as far as the Atlantic coast states and the Midwest. By Tuesday, places as far as Chicago will feel the impact of this."
There are only 150 refineries in the United States, about a third of which are located in the Gulf Coast region. But other refiners may not be able to pick up the slack from the shuttered Louisiana producers.
"Most refiners are already operating at full capacity, so the others won't be able to meet much of the shortfall," said Ramasamy.
As a result, if the storm does make a direct hit on Gulf facilities, the Energy Department said Thursday it was prepared to release supplies from the government's 700 million barrel Strategic Petroleum Reserve to cushion the blow. After Katrina and Rita, the government opened up the SPR for just the fourth time in history, shipping off just 11 million barrels to refiners.
Consumers will feel the pain
Gas prices have already started to rise as workers on offs oil rigs abandoned ship and residents fled their homes. The national average price of gasoline rose for a third day straight to $3.687, motorist group AAA reported on Sunday.
The price increase was most dramatic in Louisiana, where prices rose a bit more than 2 cents a gallon. Texas saw prices rise almost 2 cents. Mississippi's price increase was close behind, rising 1.6 cents a gallon. Gas rose by 1.4 cents a gallon in the coastal cities of Biloxi, Gulfport and Pascagoula.