UPDATE 8-Oil tumbles on U.S. fiscal impasse, Iran talks
* Democratic-led Senate suspends negotiations until House Republicans have plan
* House Republicans struggle to find common ground on fiscal impasse
* Iran says world powers have "good" reaction to its plan
NEW YORK, Oct 15 (Reuters) - Oil prices tumbled ahead of the settlement as a U.S. senator announced the Senate would suspend fiscal negotiations until House Republicans had a plan for how to proceed on the U.S. debt limit.
Prices fell on both sides of the Atlantic throughout Tuesday's session as the hope for a deal to end the U.S. debt crisis steadily diminished and Iran unveiled a proposal to achieve a breakthrough in a decade-old standoff over its nuclear program.
Brent crude dropped by nearly 40 cents on news that the U.S. Senate would suspend its talks until the House could come up with a plan. Brent crude futures settled down $1.14, at $109.90 a barrel in its third straight losing session.
U.S. oil also fell by nearly 40 cents on the news, and traded down $1.30 at $101.11 a barrel at 2:49 p.m. in the post-settlement period.
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.
"The market seemed to move forcefully on the Senate suspension," said John Kilduff, partner at Again Capital LLC in New York.
"Oil markets are going to take this hard if we can't get a deal done."
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.
U.S. stocks hit session lows in afternoon trading on Tuesday as Senate fiscal negotiations were suspended until House Republicans work out a plan to proceed on raising the U.S. debt limit, funding for the government.
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.