(Reuters) - Oil fell on Wednesday as a stalemate in the United States over raising the debt ceiling dragged on, with analysts saying the wrangling had already damaged the economy. Lawmakers have one week left to hash out a deficit-cutting plan without which Republicans in Congress have said they will not raise the legal $14.3 trillion debt limit. That uncertainty weighed on the dollar, making the currency fall to a fresh record low against the Swiss franc and limiting oil's losses. Brent fell 13 cents to $118.15 a barrel by 0644 GMT, swinging between gains and losses during Asian hours. U.S. oil dropped 24 cents to $99.35, as an industry report showed crude stocks in the country rose unexpectedly. "The uncertainty surrounding the debt ceiling issue is weighing on the dollar and that is leading to a lot of volatility in oil," said Victor Shum, an analyst at Purvin & Gertz. "Weighing on U.S. prices in particular is the increase in crude stocks." Shum expects U.S. oil to trade between $95 and $100 and Brent between $115 and $120 till the time the debt ceiling issue is resolved in the world's biggest consumer. Bank of Japan board member Hidetoshi Kamezaki said that global growth is slowing and there is uncertainty about its outlook as emerging nations battle rising costs and the debt crisis in the U.S. and Europe threaten to derail recovery. "There are many risk factors for the global economy such as worsening debt in the countries of peripheral Europe, overheating emerging economies and a surge in global commodity prices," Kamezaki said. U.S. crude stocks rose unexpectedly last week, as refinery operations fell, weekly data from oil industry group American Petroleum Institute showed. Crude stocks rose by 4 million barrels confounding analysts' expectations for a 1.7 million-barrel draw in a Reuters poll. DEBT CEILING The U.S. Congress faced more uncertainty as Republican leaders delayed action on a plan to raise the ceiling, narrowing the chances for a deal to avert a debt default. A small majority of economists -- 30 out of 53 -- said the United States will lose its AAA credit rating from one of the three big ratings agencies -- Standard & Poor's, Moody's or Fitch, according to a Reuters poll. "Until the path to global economic growth is ascertained, it will be difficult for oil markets to focus on much else, Barclays Capital said in a report. "After all, economic growth is one of the biggest drivers of oil prices." Sovereign debt will remain a key factor capping the upside in prices in the immediate future, the report said. The dollar sank to a three-month low against a basket of major currencies on Wednesday. A weak dollar can support dollar-denominated oil by making it less expensive for consumers using other currencies and by luring yield-hungry investors to commodities markets. "The dollar is weakening because a default will create uncertainty for growth and the economy, and that weakness is supporting oil futures," Shum said. "So bearish news is turning out to be bullish for oil markets." SUPPLY UNCERTAINTY Still, most analysts expect the debt ceiling issue to be resolved before the deadline and oil prices to rise due to reduced output amid growing demand from China, India and other emerging nations. Libya being away from the oil market has already reduced the OPEC's spare capacity, and concerns of disruptions from other countries will boost prices for the rest of the year, analysts said. "Supply tightness going forward is a reality and will support prices at elevated levels," Shum said. Oil prices edged up in choppy trading on Tuesday, lifted by a weak dollar. U.S. crude briefly jumped back above $100 a barrel to a six-week high after seesawing with Brent, testing technical resistance and support. (Reporting by Manash Goswami; Editing by Himani Sarkar)

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