(Reuters) - Brent crude held steady above $117 on Thursday as wary investors await a deal among U.S. lawmakers to raise the country's debt limit ahead of an August 2 deadline and as a storm approached the Gulf of Mexico, threatening to disrupt supply.
Brent crude rose 27 cents to $117.70 a barrel by 0647 GMT, after settling 85 cents lower at $117.43. U.S. oil fell for a second session, sliding 5 cents to $97.35 a barrel. The contract hit a 7-session low of $96.51 earlier as crude stockpiles unexpectedly rose.
Oil futures are unlikely to slide much further even with the economic uncertainty surrounding the U.S. and Europe as demand is expected to grow steadily amid reduced global output, analysts said. The U.S. hurricane season may also put a floor under prices over concerns of disruption in output.
"Despite the negative macroeconomic context, supply side impacts appear to be supporting prices," Natalie Robertson, an analyst at ANZ, said.
"The first storms of the Atlantic hurricane season have hit the headlines, reminding the market of potential supply disruptions from an expected active hurricane season."
Tropical Storm Don, the first major Gulf of Mexico storm this year, is headed toward the Texas coast. The gulf is home to 29 percent of U.S. oil production.
Shell Oil Co, (RDSa.L) Apache Corp, (APA.N) and Anadarko Petroleum Corp (APC.N) said they were evacuating support workers primarily from western Gulf operations. BHP Billiton and BP Plc (BP.L) (BP.N) were evacuating support workers from central Gulf platforms.
Top Republicans and Democrats worked behind the scenes on a compromise to avert the first default by the U.S. in its history. U.S. stocks suffered their worst day in eight weeks partly because of the stalemate while gold stayed near its all-time high.
Limited investment appetite amid the macroeconomic uncertainty prompted ANZ to trim its third-quarter forecast for Brent by $3 to $120 a barrel, and cut the outlook for U.S. oil to $100 from $112, analysts at the bank said in a note.
DEMAND OUTLOOK
"Few believe that the crisis will continue without some resolution before August 2, but it is now starting to look increasingly likely that the U.S. credit rating will be lowered," Peter Beutel, president of trading advisory Cameron Hanover said in a note.
"That could cost the country billions in higher credit costs."
The U.S. Treasury will lay out a plan in the next few days for the government to operate if it appears Congress may miss an August 2 deadline to raise the U.S. debt ceiling.
The oil market remains "extremely range-bound," according to analysts at Barclays Capital.
"The lack of direction is associated, in our view, with the series of rolling macroeconomic concerns, with the U.S. debt stand-off the latest trend-defeating and dominating backdrop for the market," analysts from the bank wrote in a note.
Oil data from the United States in July remained fairly weak, and that has weighed on prices, analysts said.
Crude stockpiles rose unexpectedly as a release of strategic reserves and higher imports kicked in while refiners slowed operations. Gasoline and distillates stocks also rose more than expected.
Average gasoline demand in the last four weeks fell 3.3 percent from year-ago levels, the EIA said.
"In terms of inventories, the long reduction in the inventory overhang has stalled, but not reversed, and gasoline demand indications in particular have remained subpar," Barclays Capital said in a note.
Economic growth slowed in much of the United States in June and early July, the Federal Reserve said in a report on Wednesday that cast doubt on prospects for a pickup in activity in the second half of the year.
Wednesday's data showed new orders for long-lasting U.S. manufactured goods fell unexpectedly in June, and a gauge of business spending plans slipped.
(Reporting by Florence Tan; Editing by Manash Goswami)
