UPDATE 9-Oil ends higher on optimistic U.S. budget deal outlook
* U.S. Senate edges closer to budget deal, needs House OK
* Tensions over Iran's nuclear programme ease after talks
* No EIA data due to shutdown, API report later on Weds
NEW YORK, Oct 16 (Reuters) - Crude oil futures rose on Wednesday as it appeared Congress was close to an 11th-hour deal to raise the government's debt ceiling and prevent a default.
The U.S. government shutdown and fiscal deadlock have roiled financial markets and spurred worries about energy demand in the world's largest oil consumer.
The oil market followed the stock market higher on "optimism that something's going to be accomplished" to reopen the U.S. government, said Gene McGillian, oil analyst with Tradition Energy in Stamford, Connecticut.
Major U.S. stock indexes rose as a senior Democratic aide said the Republican-led House of Representatives was expected to pass the Democratic-led Senate's bipartisan deal to end the standoff. U.S. House Republicans were expected to hold a meeting at 3 p.m. (1900 GMT) to discuss the Senate's plan.
Front-month November Brent crude oil futures expired 90 cents higher at $110.86. December Brent ended $1.17 per barrel higher at $110.59.
Brent's premium over U.S. oil has remained between the 10- and 200-day moving averages of $7.62 and $10.04 for the last seven sessions and settled at $8.57 per barrel.
The U.S. benchmark settled $1.08 per barrel higher at $102.29, after trading as high as $102.97. On Friday, the November U.S. oil futures contract lost its premium over December futures , and the gap between the two contracts has widened further, by as much as 22 cents.
Oil stocks at Cushing, Oklahoma, the delivery point for the benchmark U.S. oil futures contract, have declined by a slower pace than they have in the last few months. What's more, energy intelligence firm Genscape reported a build in Cushing stocks last week.
Traders who had bet on increasing draws at Cushing got burnt as the market swung into contango, where front-month prices are lower than the months further out.
"The slowdown in the pace of drawdowns at Cushing has weakened the euphoria and rally in WTI considerably," said Virendra Chauhan, an oil analyst with Energy Aspects in London. "With the wild swings in WTI time spreads over the past few months, there may be little appetite to position for Cushing drawing to operational minimums."
Analysts are forecasting a 2.2 million barrel build in commercial crude oil inventories this week, though the market does not have government data to compare those estimates. The U.S. Energy Information Administration did not release its weekly oil inventory data due to the government shutdown, but industry group the American Petroleum Institute will publish its report at 2030 GMT on Wednesday.
A second day of talks between six world powers and Iran over Tehran's nuclear program built hope for an end to a decade-long standoff. Still, analysts said any increase in supply from Iran will be a long way off if sanctions are lifted.
Years of sanctions have cut Iranian oil exports by more than 1 million barrels per day (bpd).
"Even in an extremely optimistic situation where sanctions were lifted, it's difficult to see how Iran could ramp up production right away," said Julius Walker, global energy markets strategist at UBS Securities in New York. "Their capacity has taken a hit due to a lack of investment and technology."
Ineos said the Grangemouth refinery in Scotland would remain shut down without making it clear whether the closure would be permanent. This fed supply concerns, which buoyed Brent.
Refinery workers have threatened to strike, and the operator said it would put a proposal to workers and review its position on the plant with shareholders next week.
Steam and power from Grangemouth is crucial for the operation of the Kinneil oil-processing terminal, where the majority of the UK's North Sea crude oil comes ashore.