UPDATE 8-Oil drops 2%, reversing course as U.S. gasoline demand slumps

* U.S. crude inventories fall 9.4 million barrels in week
-EIA
* OPEC August oil output rises for 2nd month - survey
* Factories worldwide shake off COVID-19 gloom but outlook
shaky

(New throughout, updates prices, market activity and comments
to settlement prices)
By Jessica Resnick-Ault
NEW YORK, Sept 2 (Reuters) - Oil fell more than 2% on
Wednesday, reversing early gains after a report showed gasoline
demand fell in the United States in the latest week.
Futures prices turned negative after weekly government data
from showed lower gasoline demand from a week earlier, prompting
traders to shrug off bullish U.S. crude inventory data. EIA/S
"The market is trying to dismiss the number as a
storm-related one-off," said Phil Flynn, senior analyst at Price
Futures Group in Chicago. "While the storm may have exaggerated
the numbers, it doesn't justify the amount of the sell-off that
we got."
Crude inventories USOILC=ECI fell by 9.4 million barrels
in the last week to 498.4 million barrels, a far steeper dive
than the 1.9 million-barrel drop that analysts expected in a
Reuters poll. EIA/S The data reflects a period during which
Hurricane Laura shut output and refining facilities.
Gasoline demand in the week dropped to 8.78 million barrels
per day from 9.16 million bpd a week earlier, according to the
report.
Brent crude LCOc1 , the global benchmark, fell $1.15, or
2.5%, to settle at $44.43 a barrel, after two days of price
gains. U.S. West Texas Intermediate CLc1 settled lower by
$1.25, or 2.9%, to $41.51 a barrel.
Other data also fed fears that economic recovery from the
coronavirus pandemic was lagging. U.S. private employers hired
fewer workers than expected for a second straight month in
August, suggesting the labor market recovery was slowing as the
COVID-19 pandemic persists and government support for workers
and employers dries up. Oil has recovered from historic lows hit in April, when
Brent slumped to a 21-year low below $16 and U.S. crude ended
one session in negative territory.
A record supply cut by the Organization of the Petroleum
Exporting Countries and allies, a grouping known as OPEC+, has
supported prices.
The producers have begun to return some crude to the market
as demand partially recovers and OPEC in August raised output by
about 1 million barrels per day (bpd), a Reuters survey found on
Tuesday. OPEC/O