(Reuters) - U.S. oil futures slipped more than $1 on Monday as investors exited riskier assets on concerns a default by the United States may derail growth in the economy and pare oil demand in the world's biggest consumer. From U.S. stock index futures to the Nikkei and base metals, markets have slipped as the U.S. government failed to win an agreement on raising the country's debt ceiling. Gold has benefited from the uncertainty, hitting another record on Monday, as investors piled into the safer asset. Brent crude for September fell nearly $1, trading 96 cents lower at $117.71 a barrel by 0508 GMT. U.S. oil fell $1.04 to $98.83 a barrel, after slipping as low as $98.74. It settled at a six-week high of $99.87 on Friday. "The most significant influence on the oil market is the concern that failing to raise the debt ceiling would mean the U.S. could either default or have to cut spending on a variety of social services," said Ben Westmore, a commodities economist at the National Australian Bank. "If either of these happens it would have a negative impact on U.S. oil demand, hence lower prices." Lawmakers missed a self-imposed deadline to settle a deficit-reduction deal by the time Asian markets opened on Monday, as a sharply divided Congress pursued rival budget plans that appeared unlikely to win broad support. CHANCE OF CREDIT RATING CUT Rating agency Standard & Poor's last week reiterated that there was a 50:50 chance the U.S. AAA credit rating could be cut within three months. U.S. Secretary of State Hillary Clinton sought to reassure Asian investors over U.S. debt worries, saying she was confident President Barack Obama would ultimately reach a deal with congressional leaders to prevent a catastrophic default. "The big question is whether ratings agencies will accept a medium-term deficit outcome from the negotiations," ANZ analysts said in a note. "We expect volatility to increase in commodity markets as investors re-position to risk-off trades, while the U.S. debt ceiling is being negotiated." Oil is expected to trade within a narrow range as investors await news on the debt situation in the U.S. and Europe, said Yusuke Seta, a commodities sales manager at Newedge Japan. Brent may trade at $115 to $120 a barrel, while WTI will stay between $95 and $100 a barrel this week, he said. Analysts expect the debt crisis to be resolved before the August 2 deadline as a default by the world's biggest economy would rattle financial markets and threaten the nascent recovery being seen around the world. "The debt issue will be resolved by the August 2 deadline. The economic fallout of not resolving it is too significant for the political parties to risk it," Westmore said. "It's just a bit of posturing at the moment by the Republicans and the Democrats." Expectations of rising demand from emerging nations such as China and Indian amid reduced output would put a floor under oil, and prices will recover once the debt situation is resolved, he said. On Friday, Brent crude jumped 1 percent to top $118 in light trade, buoyed by Europe's latest agreement to bail out Greece and by spread buying that widened the gap between London and U.S. crude. Investors will be scouring U.S. data on new home sales and consumer confidence on Tuesday and the country's second-quarter real GDP release on Friday to assess the economic outlook for the United States. (Reporting by Florence Tan; Editing by Clarence Fernandez and Manash Goswami)

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