NEW ORLEANS - Rescue crews worked frantically Tuesday to save hundreds of people trapped by floodwaters from Hurricane Katrina, which devastated the US Gulf Coast states of Louisiana, Mississippi and Alabama and reportedly left dozens of people dead.

The massive storm, one of the most powerful ever to hit the United States, killed at least 54 people in Mississippi, a local newspaper reported, and the death toll was expected to rise sharply from Gulf Coast towns and cities pounded by a day of ferocious winds and blinding rain.

We've got a massive search-and-rescue situation going on, we've pulled literally hundreds of people out of the waters. We believe there are hundreds more out there. We've got boats moving through neighborhoods. We've got hundreds and hundreds of houses inundated with water in eastern New Orleans.

Louisiana governor Kathleen Blanco said after Katrina slammed into this low-lying city of 1.4 million people, leaving entire neighborhoods under water.

There have been only three confirmed fatalities in New Orleans -- elderly nursing home residents who died while being evacuated -- but Mayor Ray Nagin, who ordered a mandatory evacuation of the city Sunday, told WWLTV several bodies had been seen floating in the water.

The Clarion-Ledger based in Jackson, Mississippi, reported that at least 54 people had been killed in the state, which lies to the east of New Orleans and appears to have borne the brunt of the storm. The newspaper quoted a spokesman for local emergency services as saying 30 deaths occurred in a single apartment complex in the Gulf coast city of Biloxi where tenants were drowned or crushed by debris. Falling trees accounted for some of the other two dozen deaths across the state, it said.

Katrina was blamed for another seven deaths when it battered Florida last week. Damage was estimated to be in the billions of dollars along the Gulf Coast, making Katrina among the most costly hurricanes in US history. The hurricane virtually shut down crude production in the Gulf of Mexico, at one point sending oil prices surging to record highs.

Packing winds of 240 kilometers (150 miles) per hour, the storm made landfall over Louisiana early Monday at category four -- the second-highest level on the Saffir-Simpson hurricane intensity scale, and gradually lost strength as it moved inland.

Downgraded late Monday to a tropical storm with winds of 95 kilometers (60 miles) per hour, Katrina early Tuesday was pushing its way through northern Mississippi, drenching the countryside as far as the Carolinas. With water lapping as high as the eaves on some houses, rescue crews piled into any boat they could find with a working motor and searched for people trapped in wooden homes on New Orleans's east side.

James Johnson, 47, told AFP he had spent 12 hours trapped in his attic with nothing but a hammer and a screwdriver. As the rising water filled his home, he pounded away at the insulation-lined roof trying to escape. "I feel a lot better now," he said after being brought to safety by firefighters in an aluminium skiff.

The massive rescue effort here included military and Coast Guard helicopters and continued well into the pitch black night as Louisiana Wildlife and Fisheries agents arrived to relieve exhausted fire department crews.

There's only a few firefighters left and they're pretty burned out

said Lieutenant Keith LaCaze as he prepared to lower about 40 boats into the black waters. While flood-prone New Orleans took a severe pounding, it was spared the even more punishing direct hit many had feared.

But Mississippi Governor Haley Barbour said Katrina crashed through his state like a ton of bricks. We expect that catastrophic damage has been suffered on the coast, he said at a news conference in Jackson, Mississippi.

Curfews were imposed in Mississippi and police in Louisiana were told to keep all but non-emergency personnel out of affected areas. There were isolated reports of looting and the authorities warned looters would be severely dealt with.

Officials urged the hundreds of thousands of people who fled ahead of the storm not to return home. "The power is out, the phones are down and there is no food or water, and many trees are down," said Louisiana governor Blanco. Over a million people in Louisiana, Mississippi and Alabama lost electricity.

Residents and tourists who stayed behind in New Orleans' famed French Quarter found a neighborhood ravaged like a war zone. Historic houses with their trademark ironwork balconies suffered structural damage.

Police stepped up patrols in order to prevent looting of deserted bars and shops in the neighborhood famed for its annual Mardi Gras revelry. At the massive Louisiana Superdome stadium here that sheltered 10,000 people, winds tore off parts of the roof and water poured into the building.

In Mobile, Alabama, an oil rig tore free of its moorings before surging downriver and smashing into a suspension bridge, witnesses said. US President George W. Bush offered federal disaster aid to the affected states. Oil markets also kept a close watch on the hurricane, which shut down 92 percent of US crude output in the Gulf of Mexico.

Oil prices had rocketed over a new high of 70 dollars a barrel, but prices later dropped to 67.20 dollars in New York after the US government said it could release strategic crude reserves.

The storm's insurance damages could be among the most severe in US history, according to Robert Hartwig, chief economist for the Insurance Information Institute. "There are estimates out there ranging from 12 to 25 billion," he said.