UPDATE 6-Oil trims losses, awaits end to U.S. budget stalemate
* IEA points to healthy supply picture in 2014
* Signs U.S. budget deadlock may be broken limit losses
* No CFTC data on Friday due to U.S. govt shutdown
(New throughout top. Adds new quote. Updates prices.)
NEW YORK, Oct 11 (Reuters) - U.S. crude oil futures slid on Friday, but then pared losses as investors awaited a deal in Washington to provide short-term government funding and stem economic damage to the world's largest oil consumer.
Crude oil futures tumbled more than $2 per barrel early, sinking to a session of $100.60 in a sell-off traders said may have been related to losses in gold triggered by sell stops.
But the sell-off did not have legs and prices began to stabilize, said Gene McGillian, energy analyst with Tradition Energy in Stamford, Connecticut.
"When we broke below $101, it didn't trigger any significant selling," he said. "People who got short around those levels got stopped out."
U.S. crude was down $1.49 at $101.52 per barrel at 11:02 a.m. EDT (1502 GMT), on track for its largest weekly percentage decline in three weeks.
Brent oil was 75 cents lower at $111.05 per barrel, after trading as low as $110.51. For the week, Brent was up around 1.8 percent, set for its biggest weekly gain in a month.
The spread between Brent and U.S. oil <CL-LCO1=R> was trading at $9.55 per barrel, after hitting its widest mark since June 5 at $10.01.
"It looks like investors have been caught on the wrong foot and are having to scale back their positions, pushing the WTI-Brent spread wider," said Carsten Fritsch, analyst at Commerzbank in Frankfurt.
Brent oil prices were weighed down by the outlook for improved supply. The International Energy Agency (IEA) said non-OPEC supply would rise by an average of 1.7 million barrels per day (bpd) in 2014, the highest annual growth since the 1970s.
The IEA, the West's energy watchdog, said in its monthly report that the United States would become the world's largest oil producer next year, compensating for anticipated disruption in OPEC production.
"The IEA data is bearish for prices, since investors face less risk from supply disruptions in North Africa and the Middle East," said Simon Wardell, analyst at IHS Global Insight.
Signs that U.S. President Barack Obama and Republican leaders were ready to break their deadlock over government funding stemmed further losses.
Republican leaders offered a plan on Thursday to temporarily extend the U.S. government's borrowing authority, raising hopes of an end to the budget impasse that has clouded the demand outlook in the world's biggest oil consumer.
U.S. consumer sentiment deteriorated in October to its weakest in nine months as the government shutdown weighed on the economy.
"Going forward, it's going to be a demand issue. The longer the U.S. government shutdown continues, the greater the drag on oil prices," said Michael Hewson, senior analyst at CMC markets.
Oil also found support on lingering instability in OPEC member Libya, where former militiamen briefly captured Prime Minister Ali Zeidan on Thursday.
Output in Libya only recently recovered to 700,000 barrels per day, down from a pre-war output of around 1.6 million bpd, after armed groups shut down pipelines and oil ports.
In Nigeria, Royal Dutch Shell on Friday declared a force majeure on Bonny Light crude oil <BFO-BON>, just a week after it was lifted.
The U.S. Commodity Futures Trading Commission will not publish its weekly Commitments of Traders report, which was due on Friday and gives an indication of investors' positions, because of the government shutdown.
(Additional reporting by Alexander Winning in London and Jacob Gronholt-Pedersen in Singapore; editing by Keiron Henderson, James Jukwey and David Gregorio)