* U.S. Senate edges closer to budget deal, needs House OK
* Tensions over Iran's nuclear programme ease after talks
* No EIA data due to shutdown, API report later on Weds
(Updates with API data, paragraphs 11, 12)
By Jeanine Prezioso
NEW YORK, Oct 16 Crude oil futures rose on
Wednesday as it appeared Congress was close to an 11th-hour deal
to raise the government's debt ceiling and prevent a default.
The U.S. government shutdown and fiscal deadlock have roiled
financial markets and spurred worries about energy demand in the
world's largest oil consumer.
The oil market followed the stock market higher on "optimism
that something's going to be accomplished" to reopen the U.S.
government, said Gene McGillian, oil analyst with Tradition
Energy in Stamford, Connecticut.
Major U.S. stock indexes rose as a senior Democratic aide
said the Republican-led House of Representatives was expected to
pass the Democratic-led Senate's bipartisan deal to end the
standoff. U.S. House Republicans were
expected to hold a meeting at 3 p.m. (1900 GMT) to discuss the
Front-month November Brent crude oil futures expired
90 cents higher at $110.86. December Brent ended $1.17
per barrel higher at $110.59.
Brent's premium over U.S. oil CL-LCO1=R has remained
between the 10- and 200-day moving averages of $7.62 and $10.04
for the last seven sessions and settled at $8.57 per barrel.
The U.S. benchmark settled $1.08 per barrel higher at
$102.29, after trading as high as $102.97. On Friday, the
November U.S. oil futures contract lost its premium over
December futures CLX3-Z3, and the gap between the two
contracts has widened further, by as much as 22 cents.
Oil stocks at Cushing, Oklahoma, the delivery point for the
benchmark U.S. oil futures contract, have declined by a slower
pace than they have in the last few months. What's more, energy
intelligence firm Genscape reported a build in Cushing stocks
Traders who had bet on increasing draws at Cushing got burnt
as the market swung into contango, where front-month prices are
lower than the months further out.
"The slowdown in the pace of drawdowns at Cushing has
weakened the euphoria and rally in WTI considerably," said
Virendra Chauhan, an oil analyst with Energy Aspects in London.
"With the wild swings in WTI time spreads over the past few
months, there may be little appetite to position for Cushing
drawing to operational minimums."
Crude oil stocks rose 5.9 million barrels, data from
industry group the American Petroleum Institute showed, more
than double the forecast for a 2.2 million barrel build in a
Reuters poll. Cushing stocks rose 291,000 barrels,
gasoline stocks dropped 2.2 million and distillate stocks were
off by 1.3 million barrels, API data showed.
Due to the government shutdown, the U.S. Energy Information
Administration did not release its more widely followed weekly
oil inventory data.
A second day of talks between six world powers and Iran over
Tehran's nuclear program built hope for an end to a decade-long
standoff. Still, analysts said any increase in supply from Iran
will be a long way off if sanctions are lifted.
Years of sanctions have cut Iranian oil exports by more than
1 million barrels per day (bpd).
"Even in an extremely optimistic situation where sanctions
were lifted, it's difficult to see how Iran could ramp up
production right away," said Julius Walker, global energy
markets strategist at UBS Securities in New York. "Their
capacity has taken a hit due to a lack of investment and
Ineos said the Grangemouth refinery in Scotland would remain
shut down without making it clear whether the closure would be
permanent. This fed supply concerns, which buoyed Brent.
Refinery workers have threatened to strike, and the operator
said it would put a proposal to workers and review its position
on the plant with shareholders next week.
Steam and power from Grangemouth is crucial for the
operation of the Kinneil oil-processing terminal, where the
majority of the UK's North Sea crude oil comes ashore.
(Additional reporting by Alexander Winning in London and Manash
Goswami in Singapore; editing by Jane Baird, David Gregorio and