UPDATE 7-Oil retreats as end to U.S. budget stalemate uncertain
* Workers at Grangemouth refinery, UK, plan strike Oct. 20
* Grangemouth strike may disrupt Brent flow from North Sea
* IEA points to healthy supply picture in 2014
* No CFTC data on Friday due to U.S. govt shutdown
(Refreshes lead, adds new comment, updates trading)
NEW YORK, Oct 11 (Reuters) - U.S. crude oil futures slipped on Friday as the lack of a definitive plan to end the U.S. budget stalemate was expected to weigh on the economy and prolong an erosion of oil demand in the world's largest oil consumer.
U.S. Senate Republicans said a meeting with President Obama was productive, but no deal was reached on raising the debt limit or on the government shutdown, which will enter its third week next week. 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.
Crude had somewhat pared losses by midday, after losing more than $2 per barrel in morning trading to sink to a session low of $100.60. Traders said the sell-off may have been related to losses in gold triggered by sell stops.
By late afternoon, the U.S. dollar index, which tracks the dollar's strength against a basket of currencies, had strengthened to as much as 80.536, also weighing on prices. A stronger dollar is not supportive for oil, as importing nations find it more expensive to buy dollar-priced oil in their own currencies.
"Momentum's down and the dollar's stronger," said Bill Baruch, senior market strategist at iitrader.com in Chicago.
U.S. crude was trading $1.49 per barrel lower at $101.52 at 1:50 p.m. EDT (1750 GMT), on track for its biggest weekly percentage decline in three weeks.
Brent oil was 81 cents lower at $110.99 per barrel, after trading as low as $110.51.
The spread between Brent and U.S. oil <CL-LCO1=R> was trading at $9.49 per barrel, after hitting its widest mark since June 5 at $10.01.
Brent oil prices were weighed down by an 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 a monthly report the United States would become the world's largest oil producer next year, compensating for an anticipated disruption in OPEC production.
Losses in Brent were capped by reports that workers at the Grangemouth refinery in Scotland, United Kingdom, were planning a 48-hour strike from Oct. 20, which will potentially disrupt the flow of Brent crude from the North Sea.
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, David Gregorio and Bernadette Baum)