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UPDATE 7-Oil drops 1.5%, reversing course as U.S. gasoline demand slumps

Wed, 2nd Sep 2020 04:50

* U.S. crude inventories fall 9.4 million barrels in week

* OPEC August oil output rises for 2nd month - survey

* Factories worldwide shake off COVID-19 gloom but outlook
(New throughout, updates prices, market activity and comments;
new byline, changes dateline, previous LONDON)

By Jessica Resnick-Ault

NEW YORK, Sept 2 (Reuters) - Oil fell more than 1.5% on
Wednesday, reversing course as gasoline demand fell in the
United States in the latest week, an indication that economic
recovery from the pandemic may be slower than expected.

Futures prices turned negative after weekly government data
from the U.S. showed lower gasoline demand from a week earlier,
shrugging off bullish crude inventory data.

"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 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. The data reflects a period during which
Hurricane Laura shut output and refining facilities.

Brent crude, the global benchmark, fell 69 cents, or
1.5%, to $44.89 a barrel by 11:00 a.m. EDT (1500 GMT), after two
days of price gains. U.S. West Texas Intermediate fell 82
cents, or 2%, to $41.94 a barrel.

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
(Additional reporting by Yuka Obayashi and Alex Lawler; editing
by Louise Heavens, David Evans and David Gregorio)

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