UPDATE 5-Oil retreats as debt stalemate, stocks rise weigh

Wed Jul 27, 2011 11:53am GMT

* Unexpected increase in crude stocks weighs on U.S. oil

* U.S. debt battle hurts riskier assets

* Brent neutral in $115-$120/bbl range -technicals

* Coming up: EIA inventory data at 1430 GMT (Adds poll information, updates prices)

By Simon Falush

LONDON, July 27 (Reuters) - Oil fell on Wednesday as wrangling over the U.S. debt limit unnerved investors and sent them fleeing from assets perceived to be dependent on growth.

Brent crude LCOc1 fell 49 cents to $117.79 a barrel by 1136 GMT, U.S. oil CLc1 dropped 74 cents to $98.85, also pressured by an industry report which showed crude stocks in the country rose unexpectedly.

"The main factor is the debt situation (in the United States), there are fears about growth and the country's AAA rating is under threat," Michael Hewson, analyst at CMC Markets said.

A Republican plan to cut the U.S. deficit faced delay and stiff opposition on Wednesday, piling anxiety onto investors and ordinary Americans hoping for a late compromise to avoid a crippling debt default.   Continued...

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