* Lack of deal to raise U.S. debt limit pressures oil
* Oil prices choppy, low trading volume boosts volatility
* Coming up: API oil inventory data, 4:30 p.m. EDT Tuesday (Updates with oil inventory forecast in last paragraph)
By Robert Gibbons
NEW YORK, July 25 (Reuters) - Oil prices fell on Monday as the inability of the U.S. Congress to reach agreement on raising the government debt limit kept investors wary of risky assets and concerned about the global economy.
Low trading volumes boosted volatility. Brokers and analysts expected some market participants to be sidelined awaiting the outcome of U.S. efforts to avoid default.
Concerns about a potential U.S. credit rating downgrade or even default kept markets worried about the global economy and energy demand, after a new bailout deal for Greece helped boost U.S. crude prices to a six-week high on Friday.
Brent September crude
U.S. September crude
Total crude trading volumes were well below 30-day averages, with Brent crude nearly 50 percent under and U.S. volumes more than 40 percent under with less than an hour of post-settlement trading remaining.
Oil prices bounced off early lows, staying within sight of last week's highs, and some analysts maintained that chances of a U.S. default remained remote and were unlikely to translate into a real economic crisis.
"The political circus over the U.S. debt level will probably last until the last hours before Aug. 2," Olivier Jakob of Petromatrix said in a note.
"There are enough demand uncertainties to maintain speculators on the sideline of the oil trade," he concluded.
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Full coverage of U.S. budget and debt: [ID:nUSBUDGET]
Possible outcomes for U.S. debt talks: [ID:nN1E76N0DO]
Analysis on U.S. credit rating: [ID:nN1E76N0EP]
How US debt talks became a crisis: [ID:nN1E76K1VC]
Debt impasse weighs on U.S. image:
http://link.reuters.com/tat72s
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A sharply divided U.S. Congress pursued rival budget plans that appeared unlikely to win broad support as the clock ticks toward an Aug. 2 deadline to raise the debt limit. Talks again collapsed in acrimony over the weekend. [ID:nN1E76N0CA]
U.S. stocks dipped on the sparring in Washington over the U.S. debt ceiling and gold prices hit a record high reacting to the political stalemate. [.N] [GOL/]
EURO ZONE DEBT WOES
The euro zone's debt problems also kept concerns about economic growth in focus. Moody's cut Greece's credit rating further into junk territory and said it was almost certain to slap a default tag on its debt as a result of a new European Union rescue package. [ID:nL3E7IP0P2]
Euro zone leaders and banks agreed last week that the private sector would shoulder part of the burden of a rescue deal for Greece. [ID:nL6E7IK2VL]
The euro recovered to move higher against the dollar, also in volatile trading, as investors debated the effectiveness of the Greek bailout plan. [USD/]
Both the euro and the dollar felt pressure early because of the lack of detail on the plan for Greece and as a deal on the U.S. debt ceiling remained elusive. The dollar fell to a record low against the Swiss franc and a four-month trough versus the yen.
A weaker dollar, along with shut-in production in war-torn Libya and reduced output in the North Sea, helped limit oil price losses, according to traders and analysts.
U.S. crude stocks fell last week, while products stockpiles rose, a Reuters survey of analysts on Monday showed. The American Petroleum Institute's weekly report is due on Tuesday, with the government's report following on Wednesday morning. (Additional reporting by Gene Ramos in New York, Jessica Donati in London and Florence Tan in Singapore; Editing by David Gregorio)