(Updates throughout)

By Barbara Lewis and Dmitry Zhdannikov

LONDON, Sept 3 (Reuters) - Oil rose into positive territoryon Friday after the release of stronger than expected U.S.employment data calmed expectations of a double-dip recession,although the fuel demand outlook was cautious.

U.S. crude for October rose 24 cents to $75.26 a barrel by1335 GMT, recovering from intra-day losses, while Brent gained45 cents to $77.38.

U.S. employment fell for a third straight month in August,but the decline was far less than expected and private payrollsgrowth surprised on the upside.

Still U.S. economist Nouriel Roubini told Reuters InsiderTelevision he believed things could get worse in the UnitedStates in the second half of the year and economic growth couldgo below one percent.

"Even if it is not technically a double dip recession, it isgoing to feel like a recession," said Roubini, who has beennicknamed "Doctor Doom" for his pessimistic forecasts.

The link between the economy and demand for fuel has helpedto keep oil prices closely tuned to other asset classes ratherthan to market fundamentals, chiefly record high U.S. fuelinventories.

World stocks rose while the dollar eased slightly against abasket of currencies.

Traders say the focus on other asset classes could continue,keeping oil positively correlated to equity markets andnegatively correlated to the U.S. dollar, which when weakermakes dollar-denominated commodities relatively cheap forholders of other currencies.

"We're still heavily dominated by financials. There wasquite a big build in U.S. inventories, but the market is showingresilience," said Tony Machacek of brokerage Bache Commodities.

END OF DRIVING SEASON

The U.S. data arrived ahead of a long weekend as the U.S.Labor Day holiday falls on Monday, traditionally considered asthe end of summer driving.

As Hurricane Earl swirled up the U.S. eastern coast, itposed a potential threat to some oil refineries. Althoughinventories are so high, any impact on refined product pricescould be limited and the bigger impact might be to temporarilyreduce demand for unrefined crude.

Bad weather could also curb driving demand.

On Thursday, the U.S. Energy Information said Hurricane Earlcould affect 1.1 million barrels per day of U.S. operablerefinery capacity on the Atlantic coast, or about 7 percent ofthe nation's total.

Earl has lost some force and its impact so far has been lessthan first thought.

Tropical Depression Gaston has also weakened. Forecasterssaid there was still a chance it could regenerate, but it wastoo early to tell whether it would head for the Gulf of Mexicowhere energy infrastructure is concentrated. (Additional reporting by Alejandro Barbajosa in Singapore;editing by James Jukwey)