(Refiles to show increase in stocks, in paragraph three)
* Unexpected increase in crude stocks weighs on U.S. oil
* Rising demand, reduced output put floor on crude -analyst
* Brent oil neutral in $115-$120/bbl range -technicals
By Manash Goswami
SINGAPORE, July 27 (Reuters) - Oil fell on Wednesday as a stalemate in the United States over raising the debt ceiling dragged on, with analysts saying the wrangling had already damaged the economy.
Lawmakers have one week left to hash out a deficit-cutting plan without which Republicans in Congress have said they will not raise the legal $14.3 trillion debt limit. That uncertainty helped drive gold to an all-time high for the sixth time in two weeks on Wednesday, while stock markets and base metals fell.
Brent
"The debt saga in the U.S. is weighing on both the futures contracts, and prices will remain rangebound till the time this issue is resolved," said Victor Shum, an analyst at Purvin & Gertz. "Weighing on U.S. prices in particular is the increase in crude stocks."
Shum expects U.S. oil to trade between $95 and $100 and Brent between $115 and $120 till the time the debt ceiling issue is resolved in the world's biggest consumer.
Both the benchmarks are technically neutral, according to Reuters technical analyst Wang Tao. Brent will be within $115-$120 per barrel, and is due for a fierce move, while U.S. oil is expected to be within $97.96-$100.62 per barrel, and needs to move out of the range before its next move can be evaluated.
U.S. crude stocks rose unexpectedly last week, as refinery operations fell, weekly data from oil industry group American Petroleum Institute showed. Crude stocks rose by 4 million barrels confounding analysts expectations for a 1.7 million-barrel draw in a Reuters poll.
DEBT CEILING
The U.S. Congress faced more uncertainty as Republican leaders delayed action on a plan to raise the ceiling, narrowing the chances for a deal to avert a debt default.
A small majority of economists -- 30 out of 53 -- said the United States will lose its AAA credit rating from one of the three big ratings agencies -- Standard & Poor's, Moody's or Fitch, according to a Reuters poll that also found wrangling over the debt ceiling has already damaged the economy.
"Until the path to global economic growth is ascertained, it will be difficult for oil markets to focus on much else, Barclays Capital said in a report. "After all, economic growth is one of the biggest drivers of oil prices."
Sovereign debt will remain a key factor capping the upside in prices in the immediate future, the report said.
Still, most analysts expect the debt ceiling issue to be resolved before the deadline and oil prices to rise due to reduced output amid growing demand from China, India and other emerging nations.
Libya being away from the oil market has already reduced the OPEC's spare capacity, and concerns of disruptions from other countries will boost prices for the rest of the year, analysts said.
"Supply tightness going forward is a reality and will support prices at elevated levels," Shum said.
Oil prices edged up in choppy trading on Tuesday, lifted by a weak dollar. U.S. crude briefly jumped back above $100 a barrel to a six-week high after seesawing with Brent, testing technical resistance and support. (Reporting by Manash Goswami; Editing by Clarence Fernandez)