UPDATE 3-Brent steadies as oil supply improves; demand outlook cloudy
* Obama would accept short-term increase in debt ceiling
* North Sea crude set to reach a 2013 high in November
* U.S. weekly crude stockpiles seen up 1.4 mln barrels
* Oil production in Gulf of Mexico ramping up towards normal
(Updates previous SINGAPORE)
LONDON, Oct 8 (Reuters) - Brent crude oil held above $109 a barrel on Tuesday as the oil supply outlook improved and the U.S. budget crisis continued to cloud the outlook for demand in the world's biggest oil consumer.
And upward pressure on Brent could ease, as the supply of North Sea crude that underpins the benchmark is set to reach a 2013 high in November, according to loading programmes.
The increase is another sign of improving supply on top of the partial return of Libyan output.
"While we are still short in terms of Libyan barrels compared to pre-protest levels, their limited return combined with higher North Sea volumes will ward off the kind of tightness in sweet supply that we were witnessing this time last month," said JBC Energy.
Brent was off 7 cents at $109.61 a barrel at 0856 GMT. U.S. oil was up 22 cents at $103.25.
Concern continued to linger that the U.S. government shutdown would cut demand for oil and hurt consumer confidence. JPMorgan economists estimate that every week of shutdown translates to a 0.12 percent reduction in the U.S. quarterly annualised GDP growth rate.
President Barack Obama said on Monday he would accept a short-term increase in the nation's borrowing authority to avoid a default. The comment came one week into the government shutdown and only 10 days from a critical deadline to raise the country's debt ceiling.
"Energy markets are carefully watching the situation in the United States. It's not so much about what is happening right at the moment, but how it will all work out," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
Oil production in the U.S. Gulf of Mexico was ramping up towards normal on Monday after Tropical Storm Karen faltered off the Gulf Coast. Storm warnings had prompted energy firms to shut nearly two-thirds of oil output as of Saturday.
U.S. commercial crude oil inventories are meanwhile forecast to have risen 1.4 million barrels in the week ended Oct. 4, a preliminary Reuters poll of six analysts showed.
The U.S. Energy Information Administration is expected to release its data on Wednesday at 1430 GMT, despite the government shutdown.
(Additional reporting by Jacob Gronholt-Pedersen in Singapore; editing by Jason Neely)