* API data shows US crude stocks down 5.2 mln bbls
* IEA has not yet decided on further release of stocks
* Goldman stumbles on commodities, takes on more risk
* Coming up: EIA oil inventory data, 1430 GMT
By Randy Fabi
SINGAPORE, July 20 (Reuters) - Oil rose on Wednesday, supported by hopes of a U.S. debt deal, a weakening dollar against the euro and tightening crude stocks in the world's largest oil consumer.
Brent crude
"Any positive news on either the U.S. debt ceiling and the Greek second bailout will push up the market," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.
"Traders are just waiting for some confirmation that things are progressing so they can put these two economic issues behind them."
According to technical charts, Brent must rise past $120 to break through its current tight trading range, while U.S. oil may continue to rise towards $100.59, Reuters analyst Wang Tao said.
A group of Democratic and Republican senators offered an ambitious plan on Tuesday that could revive stalled U.S. debt talks and the prospect of a long-term deficit reduction deal to avert a default by the United States.
With just two weeks left until the federal government runs out of money to pay all of its bill, President Barack Obama seized on the plan by the so-called Gang of Six as a "very significant step" and urged congressional leaders to start discussing it.
On the other side of the Atlantic, German Chancellor Angela Merkel doused expectations of any comprehensive solution to Greece's debt crisis at an emergency euro zone summit on Thursday, saying "further steps will be necessary and not just one spectacular event which solves everything."
Despite the bleak outlook, investors remained hopeful policymakers would eventually reach a deal to provide further aid for Greece, helping to lift the euro against the dollar.
Oil also found support from a larger-than-expected drop in U.S. crude inventories and expectations that the International Energy Agency will not tap into more of its emergency reserves.
Industry group American Petroleum Institute reported a 5.2 million barrel drop in domestic crude stocks, surpassing expectations for a 1.7 million barrel fall, as refinery runs rose.
The U.S. Energy Information Administration will issue its own weekly data later on Wednesday.
IEA's executive director said the agency has yet to decide whether another release from emergency stocks was needed, although the French energy minister said there were no plans for another release.
The IEA in June announced the release of 60 million barrels from emergency stockpiles for one month -- the third such move in the agency's history -- in a temporary measure to fill a supply gap caused by disruptions in Libyan output.
In other news, Goldman Sachs , long renowned as one of the largest and savviest commodity derivatives traders, on Tuesday blamed its commodities trading desk for much of the massive drop in trading profits in the second quarter, even after its own analysts correctly called for a pull-back in prices. (Editing by Himani Sarkar)