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Crude falls as flooding from Harvey roils U.S. oil industry

* U.S. oil falls in early trading

* Gives up some of Thursday's gains

* Turmoil from Harvey continues

TOKYO, Sept 1 (Reuters) - U.S. crude futures fell in early Asian trading on Friday, partly reversing sharp gains from the previous session, amid ongoing turmoil in the oil industry with a quarter of U.S. refining capacity offline.

U.S. West Texas Intermediate (WTI) was down 25 cents, or 0.5 percent, at $46.98 barrel at 0028 GMT. The contract settled up 2.8 percent on Thursday.

The new Brent contract for November delivery was down 10 cents at $52.76 barrel. The contract for October delivery, which ended trading on Thursday, closed up $1.52, or 2.99 percent, at $52.38 a barrel.

U.S. gasoline futures have rallied more than 28 percent to a two-year high above $2 a gallon, buoyed by fears of a fuel shortage days ahead of the U.S. Labor Day weekend's traditional surge in driving.

Gasoline for September delivery settled up 25.52 cents, or 13.54 percent, at $2.1399 on the last day of trading in the contract. Gasoline for October delivery was down 0.2 percent at $1.7754, suggesting traders believe the supply shock will ease by then.

Hurricane Harvey has killed at least 35 people and brought record flooding to the U.S. oil heartland of Texas, paralyzing at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates.

The U.S. Department of the Interior's Bureau of Safety and Environmental Enforcement said that roughly 13.5 percent of oil production in the Gulf of Mexico was also shut in on Thursday.

The U.S. government tapped its strategic oil reserves for the first time in five years on Thursday, releasing 1 million barrels of crude to a working refinery in Louisiana.

Traders were also scrambling to redirect fuel to the United States.

U.S. crude stocks fell sharply last week even as refineries hiked output in the run up to the Harvey's approach, the Energy Information Administration said on Wednesday.

Crude inventories fell by 5.4 million barrels in the week to Aug. 25, compared with analysts' expectations for an decrease of 1.9 million barrels.

Gasoline stocks rose by 35,000 barrels, compared with analysts' expectations in a Reuters poll for a 1.0 million-barrel drop. Overall gasoline demand hit a record in the week, hitting an estimated 9.85 million barrels per day.

(Reporting by Aaron Sheldrick; Editing by Richard Pullin)