By John Tilak

TORONTO (Reuters) - Canada's main stock index rose on Friday as energy shares gained with the price of oil after Tropical Storm Karen disrupted U. S. production in the Gulf of Mexico, but the benchmark Toronto index ended the week lower.

As the storm moved through the Gulf, the price of oil rose on supply concerns. That took some of the attention away from the U. S. government shutdown, which had consumed the market all week.

With the shutdown dragging into a fourth day, investors watched closely as Republican members of the House of Representatives held their ground in a standoff with President Barack Obama.

But the market appeared to shrug off fears that U. S. lawmakers will fail to resolve the budget crisis and prevent a debt default.

"There's a certain amount of fatigue from several days of losing trade," said John Stephenson, senior vice president at First Asset Investment Management Inc, adding that investors expect a resolution soon.

"Today the story is all about energy," he said. "Investors are looking around and saying energy looks attractive."

Investors are starting to see value in Canadian energy stocks because of consistently performing large-cap names, attractive valuations, and a world that's becoming more energy-dependent, Stephenson said.

The Toronto Stock Exchange's S&P/TSX composite index <. GSPTSE> closed up 23.53 points, or 0.18 percent, at 12,758.65.

Rick Hutcheon, president and chief operating officer at RKH Investments, said the TSX will tread water until the U. S. political stalemate is resolved but will make gains as the economy improves and commodity prices stabilize.

"Everyone is sitting on their hands, waiting for Washington to make their move," he said. "They'll have their bickering and fighting, but ultimately they'll come to an agreement."

Seven of the 10 main sectors on the index were higher.

Energy companies climbed, with Suncor Energy Inc <SU. TO> adding 1.2 percent to C$36.69, playing the biggest role of any single stock in leading the index higher. Canadian Natural Resources Ltd <CNQ. TO> rose 1.3 percent to C$32.18.

Financials, the index's most heavily weighted sector, advanced 0.2 percent. Royal Bank of Canada <RY. TO> rose 0.5 percent to C$66.29, and Toronto-Dominion Bank <TD. TO> was up 0.1 percent at C$91.28.

Air Canada <ACb. TO> jumped about 13 percent to C$4.49 after it reported strong third-quarter traffic and said measures it has taken to control costs were having a better-than-expected impact.

($1=$1.03 Canadian)

(Editing by Peter Galloway)


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