KATRINA / Damage called "catastrophic"

New Orleans reported to be 80% underwater, ports closed

SAN FRANCISCO (MarketWatch) -- The head of the Federal Emergency Management Agency said Tuesday that Hurricane Katrina had caused "catastrophic damage" to Louisiana, Mississippi and Alabama.

Michael Brown, the director of FEMA, also said it would be "quite a while" before displaced residents could return to the affected areas, according to the Associated Press.

Mississippi Gov. Haley Barbour told NBC's "Today Show" that the death toll from a single county in the state could be as high as 80.

New Orleans was reported to be 80% underwater, ports in the region were closed until further notice, and at least one levee break cause more flooding in the hard-city city.

Crude oil futures touched an all-time high of $70.85 in New York trading as investors sought to gauge the severity and longevity of disruption in the sector.

Rescuers searched by boat and helicopter for survivors and brought soaked victims to shelters.Katrina, potentially one of the costliest storms in U.S. history, was downgraded to a tropical depression on Tuesday, with the center of the storm charted about 25 miles south of Clarksville, Tenn. as of 11 a.m. Eastern time.

Rainfall accumulations of 2-6 inches will accompany Katrina across the Ohio Valley, the lower Great Lakes, and into northern New England, the Nationa. In the aftermath of the storm, the National Weather Service also warned of the threat of tornadoes.

The storm hit the Gulf Coast early Monday as a Category 4 hurricane, with 145-mph winds.

U.S. stocks rallied as oil jitters and fears of the economic impact of the hurricane eased.

New Orleans was pounded Monday, and, although it escaped the eye of the storm, two flood levees broke, and 80% of the city was reported to be underwater. New Orleans Mayor Ray Nagin warned of the possibility of a "significant" death toll in the city of almost half a million with a metropolitan population of 1.3 million.

The worst flooding was reported on Mississippi's Gulf coastline, which was slammed by a 22-foot surge, the AP said.

More than 1.8 million homes and businesses were without power Tuesday in Mississippi, Alabama and Louisiana, according to utilities in the region. Utility companies said customers should be prepared for extended outages, as damage to the utility's system could take weeks to repair.

According to catastrophe-modeling firms, the hurricane could cost insurers $9 billion to $26 billion, making the storm at least the fourth-most-expensive catastrophe in U.S. history, after the Northridge earthquake in 1994, Hurricane Andrew in 1992 and the Sept. 11 terrorist attacks in 2001.

Risk Management Solutions said the hurricane could result in between $10 billion and $25 billion in insured losses.

Eqecat initially estimated insured losses of $12 billion to $25 billion, then cut its range to $9 billion to $16 billion.

Fitch Ratings said Hurricane Katrina likely would result in the largest insured loss from a single event since the terrorist attacks of Sept. 11, 2001, and the largest U.S. hurricane loss since Hurricane Andrew, which caused $21 billion in damage and killed more than 40 people in South Florida.

Fitch added that the loss would be material to both the primary insurers located in the United States and to the reinsurance industry.

The hurricane's impact on the transport sector is being felt along most of the Gulf Coast, with the Port of New Orleans, the country's biggest by volume, shut to commerce until further notice. The Port of New Orleans handled 31.4 million tons of cargo in 2004.

Port Fourchon in Lousiana, through which about one-sixth of the U.S. oil supply travels, remained closed and without power, Ted Falgout, director of the port, told the cable channel CNBC Tuesday. Falgout could not say when the port would be reopened, adding that power would need to be restored first.

Falgout also noted that an alternative port, Venice, was even harder-hit, and called the outlook for the energy sector "very iffy."

The Coast Guard ordered all ports shut from Morgan City, La., to Pensacola, Fla., ahead of the storm.

The closures are likely to send prices sharply higher in numerous commodity markets.

The New York Board of Trade declared a "force majeure" on coffee deliveries at the Port of New Orleans due to Hurricane Katrina, meaning that deliveries won't be made until a date to be determined by the board. September coffee closed 92.6 cents a pound, up 1% Monday, ahead of the news.

Katrina shuttered nine airports throughout the southeastern United States and caused delays at regional facilities as well.

A meteorologist at the National Hurricane Center said the northern part of the storm's eye came ashore at about 7 a.m. Eastern time Monday. The hurricane had been a Category 5 storm before being downgraded to Category 4 as it made landfall. It was ultimately downgraded to Category 1 by Monday afternoon.

As the storm moved north, Nissan North America halted production at its Canton, Miss., plant. The Nissan Motors unit said it plans to resume production Tuesday morning, though the plan would be revised based on local conditions.

Gas futures spiked 16.4%, and oil traded at $70 a barrel amid fears that Katrina had severely damaged the oil-transport infrastructure. A potential crisis in the natural-gas market was averted after Sabine Pipeline LLC reopened the Henry Hub gathering facility.

Pioneer Natural Resources Co. said that daily net production of 65 million cubic feet of gas and 5,000 barrels of oil was shut in as a result of the storm. The company expects that personnel will begin returning to offshore platforms to assess damage later this week, it said.

Valero Energy Corp. said that its St. Charles refinery in Louisiana is without power and that it may take two to three days for power to be restored. Valero expects to reopen the refinery, which has a production capacity of 260,000 barrels a day, in one to two weeks. The company said that no major damage is apparent and there's no evidence of spills or leaks.