UPDATE 7-US oil price lowest since July as Cushing stocks build
* U.S. default averted but more talks needed soon
* Oil stocks at Cushing build, pressuring the market
* U.S. encouraged by talks with Iran
* CFTC will not release COT report
(Adds new quotes, updates prices.)
NEW YORK, Oct 17 (Reuters) - U.S. oil prices slid more than 2 percent to their lowest since early July on Thursday as stockpiles in the Cushing, Oklahoma, oil hub began to reverse a months-long decline, while encouraging rhetoric around talks over Iran's nuclear program also pressured prices.
Oil prices slid through the afternoon, more than erasing Wednesday's rally. European Brent crude headed for its biggest one-day drop in a month.
President Barack Obama signed legislation overnight to reopen the government and put off a potential debt default, but U.S. lawmakers must iron out another deal early next year to raise the debt ceiling. Funding runs until Jan. 15.
Front-month December Brent crude was down $1.47 per barrel to $109.12 by 1:29 p.m. EDT (1729 GMT). U.S. oil was trading $1.54 per barrel lower at $100.75, after sliding as low as $100.03, the lowest since July 3.
Oil stocks at the Cushing, Oklahoma, oil storage hub rose by 836,798 barrels in the week to Oct. 11, data from energy intelligence company Genscape showed on Thursday. Industry data from the American Petroleum Institute released on Wednesday showed Cushing stocks rose for the first time since early July.
"I think yesterday's API build put a lot of pressure on the market," said Gene McGillian, energy analyst with Tradition Energy in Stamford, Connecticut.
Total U.S. crude stocks rose by 5.9 million barrels in the week to Oct. 11, more than double forecasts in a Reuters poll of analysts for a build of 2.2 million barrels. Government data on oil inventories was not available this week due to the shutdown.
The spread between the November and December U.S. oil futures contracts <CLX3-Z3> widened further to 25 cents. Analysts had anticipated further widening of the first two U.S. oil contract months if stocks at Cushing built. The spread between Brent and WTI <CL-LCO1=R> widened to $8.93 a barrel and was last trading at $8.20.
The build in Cushing underscores rising supply, especially from the United States, even as demand remains soft.
"We have an enormous amount of crude oil production worldwide, especially here, and tepid demand growth," said Sarah Emerson, managing director of Energy Security Analysis Inc in Wakefield, Massachusetts. "We're in a surplus market and that surplus is definitely going to start weighing on prices."
Encouraging rhetoric around talks over Iran's nuclear program also pressured prices. Years of sanctions have cut Iranian oil exports by more than 1 million barrels per day (bpd). The U.S. described two days of talks with Iran as the most serious and candid to date.
"They're ready to export," Emerson said. "I think they could go up to 800,000 (bpd) or a million pretty quickly."
Some dealers fretted over the economic fallout of the U.S. shutdown on the world's largest oil consumer. The furloughs have shaved at least 0.6 percentage point off estimates for fourth-quarter growth in gross domestic product, Standard & Poor's said in a statement on Wednesday.
Energy Information Administration (EIA) data, usually released weekly on a Wednesday, were not released this week due to the shutdown. The EIA said on Thursday schedules for the resumption of the reports will be announced as they become available.
The U.S. Commodity Futures Trading Commission also will not release its weekly Commitments of Traders report on Friday.
(Additional reporting by Alexander Winning and Simon Falush in London and Manash Goswami in Singapore; Editing by William Hardy and Theodore d'Afflisio)