UPDATE 7-Oil falls on U.S. fiscal impasse, Iran talks
* Republicans struggle to find common ground on fiscal impasse
* Democratic-led Senate close to a deal to reopen government
* Iran says world powers have "good" reaction to its plan
NEW YORK, Oct 15 (Reuters) - Oil prices dropped on both sides of the Atlantic Tuesday as the hope for a deal to end the U.S. debt crisis diminished and Iran unveiled a proposal to achieve a breakthrough in a decade-old standoff over its nuclear program.
Republicans in the U.S. House of Representatives struggled to find a strategy on Tuesday to end a fiscal impasse, complicating prospects for a deal with President Barack Obama to reopen the government and raise the country's borrowing authority.
House Speaker John Boehner said they had not reached any decisions on how to proceed, but were determined not to allow a default. Leaders from the U.S. Senate also stressed they were working to reach a deal before a Thursday deadline.
House Republican leaders proposed a plan to reopen the government and avoid debt default but it was rejected in a meeting with rank and file lawmakers. The plan differed in a few important details from one in the U.S. Senate.
"We're trying to sort out the effect of the antics in Washington and whether they're going to have a deal or not," said John Kilduff, partner at Again Capital LLC in New York.
"The rhetoric is not calming down as much as many of us had hoped."
NUCLEAR TALKS BEGIN IN GENEVA
Iranian Deputy Foreign Minister Abbas Araqchi described a negotiation meeting on Tuesday in Geneva as "good" and said he thought the proposal "has the capacity to make a breakthrough."
However, The White House warned on Tuesday against expecting quick results from international talks in Geneva on Iran's nuclear program, saying the discussions are complex and technical and that economic pressures against Teheran would remain in place.
Brent crude fell 83 cents to $110.21 a barrel by 1:23 p.m. EDT (1529 GMT), paring losses after earlier losing more than $1 and settling lower the previous two sessions.
U.S. oil fell 79 cents to $101.62 a barrel, after also losing more than $1 earlier in the session.
U.S. stocks also were down on Tuesday in light trading as prospects for an agreement to end the U.S. government's fiscal impasse shifted from bright to dim.
The talks that started on Tuesday on Iran's nuclear development are the first since the election of President Hassan Rouhani, who has tried to improve ties with the West to pave the way for an end to sanctions that have cut Iranian oil exports by more than 1 million barrels per day.
On Monday, the United States held out the prospect of quick relief from sanctions for Iran if Tehran moved swiftly to allay concerns about its nuclear program.
While oil prices could fall around $10 per barrel if sanctions were removed and Iran resumes full exports, analysts cautioned that it might still take months, if not years, before free-flowing Iranian oil would be back on the world market.
"If you're selling the market based on Iran, it seems to be a little premature because it's a long way to go before sanctions are lifted and barrels come back onto the market," said Andy Lebow, vice president at Jefferies Bache in New York.
GRANGEMOUTH, U.S. OIL STOCKS
Britain's Grangemouth refinery began halting work on Monday ahead of a 48-hour strike. In 2008, a strike there interrupted flows of crude through the Forties Pipeline System and shut in production at 70 North Sea fields, pushing up Brent prices.
BP, which relies on Grangemouth for steam and power for its Kinneil oil processing terminal, said Tuesday it understands there is an intent to keep the Forties oil pipeline operating should the strike proceed, and has advised oil buyers that crude will keep flowing. .
"The Grangemouth refinery shutdown is going to end up being somewhat supportive for the market, so it's a sort of push-pull we're seeing," said Kilduff.
Investors will do without oil inventory data from the U.S. government this week for the first time since 1979, as the Energy Information Administration refrains from publishing its weekly report due to a lack of funds.
U.S. commercial crude oil inventories were forecast to have increased by 2.3 million barrels in the week to Oct. 11, a Reuters poll of analysts showed on Monday.
The American Petroleum Institute, an industry group, will release its weekly inventory report on Wednesday.