UPDATE 9-Oil ends lower as U.S. budget fight continues
* Workers at Grangemouth refinery, UK, plan strike Oct. 20
* Grangemouth strike may disrupt Brent flow from North Sea
* U.S. will overtake Russia as largest oil producer -IEA (Adds details on the reason the market pared losses, details on IEA report.)
By Jeanine Prezioso
NEW YORK, Oct 11 (Reuters) - U.S. crude oil futures settled lower and with their biggest weekly decline in four weeks on Friday as the budget fight in Washington between U.S. political parties was expected to linger into next week and erode demand in the world's largest oil consumer.
Prices fell in morning trading that traders said may have been related to losses in gold and the triggering of chart-based sell orders in oil. By the time oil settled Friday afternoon, U.S. crude oil had pared more than one dollar's worth of those losses.
Nervous traders holding short positions and unsure of how the budget crisis may play out in the next couple of days chose to buy them back ahead of the weekend.
"We had a short covering rally into the close," said Bill Baruch, senior market strategist at iitrader.com in Chicago. "That's what we've been seeing pretty much every session into the weekend."
The ongoing partial shutdown of the U.S. government, which prevented economic data from being released and kept hundreds of thousands of workers home without pay, is largely expected to dent economic growth.
U.S. Senate Republicans said a meeting with President Obama was productive, but no deal was reached on raising the debt limit or on the government shutdown, which will enter its third week next week. U.S. consumer sentiment deteriorated in October to its weakest in nine months as the government shutdown weighed on the economy.
"Going forward, it's going to be a demand issue. The longer the U.S. government shutdown continues, the greater the drag on oil prices," said Michael Hewson, senior analyst at CMC markets.
U.S. crude oil settled 99 cents lower at $102.02 per barrel, after trading more than $2 lower to $100.60. The contract lost 1.75 percent on the week, the largest weekly decline since the week to Sept. 20.
Brent oil, the global benchmark, did not decline by as much. Front-month Brent oil for November delivery settled 52 cents lower at $111.28 per barrel, after trading as low as $110.51. Brent settled with its largest increase in one month, with a 1.7 percent gain on the week. The contract expires at the end of the trading session on Wednesday.
The spread between Brent and U.S. oil CL-LCO1=R settled at $9.26 per barrel, after hitting its widest mark since June 5 at $10.01.
The outlook for increased supply also weighed on oil prices. The International Energy Agency, the West's energy watchdog, said non-OPEC supply would rise by an average of 1.7 million barrels per day (bpd) in 2014, the highest annual growth since the 1970s.
Oil production in the United States will show no sign of slowing. The United States would become the world's largest oil producer next year, compensating for anticipated disruption in OPEC production, the agency said in its monthly report.
Losses in Brent were capped by reports that workers at the Grangemouth refinery in Scotland were planning a 48-hour strike from Oct. 20, which will potentially disrupt the flow of Brent crude from the North Sea.
The U.S. gasoline futures contract settled 1.1 percent lower at $2.6681 per gallon, after trading at a three-week high in the previous session. News that the U.S. Environmental Protection Agency may change its biofuel blending requirement for gasoline supported prices, though the EPA said it had not yet made a final decision on next year's ethanol mandates.
"If the EPA's really going to lower their requirements for ethanol blending that would be good for gasoline prices," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut. (Additional reporting by Robert Gibbons in New York, Alexander Winning in London and Jacob Gronholt-Pedersen in Singapore; Editing by Keiron Henderson, James Jukwey, David Gregorio, Bernadette Baum and Bob Burgdorfer)
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