UPDATE 6-Oil falls below $109 on stockpiles, fiscal concerns
* U.S. oil inventories up - EIA
* U.S. "fiscal cliff" showdown may drag on after Christmas
(Updates prices, adds quote, U.S. jobless claims and retail sales)
LONDON, Dec 13 (Reuters) - Crude oil slipped below $109 a barrel on Thursday due to rising U.S. oil stockpiles while fears that the world's largest economy might miss a deadline for next year's budget and risk a recession also kept bulls in check.
Benchmark Brent crude fell 79 cents to $108.71 a barrel by 1517 GMT. U.S. crude was at $86.67, down 11 cents. The January Brent contract expires on Friday.
Deadlocked talks to avert a "fiscal cliff" of steep tax increases and budget cuts in the United States returned to investors' focus after announcements by the U.S. Federal Reserve of more monetary stimulus buoyed global markets on Wednesday.
Failure to reach a compromise on the U.S. budget by the end of the year risks pushing the world's biggest oil consumer into recession and this has stoked fears a fragile recovery trend emerging in China and some other countries would be stifled.
Sharp differences on the 2013 budget persisted between Congressional Republicans and the White House on Wednesday, when negotiators warned the showdown could drag on past Christmas.
U.S. crude inventories rose last week, against expectations of a fall, while gasoline and distillates stockpiles jumped more than expected. The fuel stocks rose despite a pull-back in refinery output and steady import levels.
U.S. retail sales rose in November and jobless claims fell sharply last week, data showed, but worries over the U.S. budget weighed on oil prices.
"The U.S. data took our minds off the fiscal cliff for a few moments, but the possibility that going over the cliff might cause a recession continues to limit crude prices along with high inventories and relatively warm temperatures in the U.S.," said Phil Flynn, analyst at Price Futures Group in Chicago.
Demand will be sluggish through 2013 as economic expansion stays tepid and crude supply levels comfortable, which could ease price pressure on consumers, the International Energy Agency (IEA) said on Wednesday.
Global oil demand would grow by 865,000 barrels per day in 2013 to hit 90.5 million bpd, the IEA said.
OPEC TARGET UNCHANGED
In Vienna, OPEC agreed on Wednesday to retain the producer group's 30-million barrels-per-day output target and is relaxed about the prospect of rising inventories in the first half of next year.
"It became clear once again that the cartel is relatively unwilling to act, especially when prices are high," Commerzbank commodity analysts said in a note.
The target is higher than is required from OPEC to meet demand next year, some market observers say, but the excess supply has cushioned the impact on prices from a sharp drop in Iranian oil exports due to sanctions this year.
Big powers hope soon to agree with Iran to hold a new round of nuclear talks in another bid to resolve a protracted dispute over Tehran's atomic programme.
Inspectors from the U.N. nuclear watchdog arrived in Tehran for the first such meeting since August to ease international concerns over the programme.
(Additional reporting by Florence Tan in Singapore; Editing by Anthony Barker and Jason Neely)