Tropical Storm Lee threatened the Louisiana coast with torrential rains and flooding and shut nearly half of US offshore crude oil production and a third of its gas production.

The slow-moving storm is expected to reach the Louisiana coast early on Sunday and bring 10-15 inches (25 to 38 cm) of rain to southeast Louisiana over the weekend, including the low-lying city of New Orleans, the US National Hurricane Center said.

Lee was about 200 miles (320 km) southeast of Cameron, Louisiana, with maximum winds of 40 mph (65 kph), the hurricane center said. It issued tropical storm warnings stretching from Pascagoula, Mississippi, to Sabine Pass, Texas.

Louisiana Governor Bobby Jindal warned that heavy rains, substantial winds and tidal surges from the Gulf of Mexico could produce flash flooding in parts of New Orleans throughout the US Labor Day holiday weekend.

"Get ready for the wind, get ready for the rain, it's coming and it's going to be here for a while," Jindal said at a briefing in Baton Rouge. Jindal has declared a state of emergency for Louisiana, and Mississippi Governor Haley Barbour made a similar ruling for seven coastal counties.

Lee has a 50-60 per cent chance of reaching hurricane strength, AccuWeather Senior Meteorologist Bernie Rayno told Reuters Insider.

"The problem with this system is that it's so slow-moving," Rayno said. "The big story is going to be the flooding."

Major offshore producers like Royal Dutch Shell, Exxon Mobil Corp and BP Plc shut down platforms and evacuating staff earlier this week.

About half the region's oil production and a third of its gas production was shut on Friday, according to the US government. Most of that output should quickly return once the storm passes.

US crude oil futures dropped more than $2 a barrel on Friday as dismal job growth figures outweighed supply concerns.

Lee is expected to have a minimal long-term impact on the Gulf of Mexico oil patch, which provides about a third of the nation's oil production and about 12 percent of its natural gas.

The prospects of flooding in low-lying New Orleans elicited memories of Hurricane Katrina in 2005, which flooded 80 percent of the city, killed 1,500 people and caused more than $80 billion in damage.

But Lee's flooding potential is much lower and should spur nothing more than localized flooding in coastal and low-lying areas, New Orleans safety officials said.

"There may be some minor flooding for short periods of time," said Jerry Sneed, deputy mayor of public safety, speaking on CNN. The city's system of levees and locks should hold up under the strain, Sneed said.

The downpour could quench swamp fires near New Orleans that has filled the city with smoke and haze.

The Gulf Coast is home to 40 percent of US refining capacity and 30 percent of natural gas processing plant capacity. Much of that infrastructure is in southeast Texas and near the coasts of Louisiana and Mississippi.

Energy experts said there could be minor flooding at area refineries, but an expected 4-foot (1.2-metre) tidal surge will not cause major damage.

"Basically they'll just ride it out," said Alfred Luaces, a managing consultant with Purvin and Gurtz, a Houston energy consulting company.

Will Hinson, spokesman for Exxon Mobil Corp's joint-venture 192,500 barrel-per-day (bpd) refinery in Chalmette, Louisiana, said the plant was prepared and was operating normally.

Other refiners also said they were prepared for bad weather and were monitoring the system. – Reuters