UPDATE 1-Brent steady near $110 as US Senate pushes for debt deal
* US Senate close to last minute deal on debt limit
* Debt issues expected to resurface in few months
* Backlog of US data means volatile oil market for weeks
* Brent crude to drop to $108.03 - technicals
(Adds comments, US crude stocks forecast, updates prices)
SINGAPORE, Oct 16 (Reuters) - Brent futures held steady near $110 a barrel on Wednesday as the U.S. Senate inched towards a last minute deal to raise the nation's borrowing authority and provide temporary government funding.
Lawmakers said a deal to extend the government's borrowing authority until Feb. 7 was close, helping the world's biggest economy tide over the immediate crisis.
But without a long-term solution the same issues will again start grabbing headlines a few months later.
"There's no doubt there will be a deal, but that's just kicking the can down the road a bit," said Ben Le Brun, a market analyst at OptionsXpress in Sydney. "This issue is still a concern for markets as it will start playing out again in a few months time."
Brent crude slipped 13 cents to $109.83 a barrel by 0555 GMT, after ending $1.14 lower in the previous session. U.S. oil fell 14 cents to $101.05, after settling down $1.20.
If Congress fails to reach a deal by Thursday, checks would likely go out on time for a short while for everyone from bondholders to workers who are owed unemployment benefits. But analysts warn that a default on government obligations could quickly follow, potentially causing the U.S. financial sector to freeze up and threaten the global economy.
Fitch Ratings has already warned it could cut the sovereign credit rating of the United States from AAA.
Oil prices will stay around the current range until an announcement on a debt deal, Le Brun said.
After that, oil and other markets could be very volatile for the next few weeks because of a huge backlog of data such as employment numbers that have been held up because of the shutdown of the U.S. government.
"There is hardly any activity in the market," said a Singapore-based trader with a western firm. "Everybody is waiting and watching the outcome of the US debt negotiations."
WEIGHING ON PRICES
Oil investors are also awaiting the outcome of a meeting between world powers and Iran over Tehran's disputed nuclear programme.
The West wants Tehran to back up its newly conciliatory language with concrete actions by scaling back its nuclear programme and allaying their suspicions it is seeking the capability to make atomic bombs.
Expectations of a well supplied market is also weighing on sentiment. Fast-growing Middle East exporter Iraq is aiming to ramp up output to 3.5 million barrels per day (bpd) by year-end, deputy prime minister for energy Hussain Al-Shahristani said on Wednesday. Its export capacity will rise to 4 million bpd by next year, he said.
Prices are also under pressure on expectations that U.S. commercial crude oil inventories rose last week, by an average 2.2 million bpd.
The U.S. Energy Information Administration will not release the weekly oil and natural gas inventory data starting this week due to a government shutdown, but the industry group the American Petroleum Institute (API) will publish its report later in the day, delayed one day due to the Columbus Day holiday.
Brent is expected to fall to $108.03 per barrel, while a bearish target at $98.15 has been established for U.S. oil, according to Reuters technical analyst Wang Tao.
(Reporting by Manash Goswami; Editing by Richard Pullin and Michael Perry)