UPDATE 5-Oil slips below $109 on US stocks build, budget impasse
* U.S. budget impasse threatens to curb demand
* Supply disruptions may push oil to $150 next year -IMF
* US crude stocks rise more than expected -EIA
(Writes through with EIA data, new quotes, Yellen)
LONDON, Oct 9 (Reuters) - Global oil prices fell below $109 a barrel on Wednesday, after the largest weekly build up of U.S. crude stocks in a year added to concerns that a budget impasse in Washington would curb demand in the world's biggest oil consumer.
Brent crude fell $1.35 to $108.81 per barrel by 1536 GMT, after settling higher on Tuesday for a third straight session. U.S. oil was $1.79 down at $101.70 per barrel.
Oil prices had edged lower earlier in the day after U.S. lawmakers made little progress towards ending the budget stalemate, though declines were limited by concerns that further unrest in Egypt and Libya could disrupt Middle East supply.
But data from the U.S. Energy Information Administration (EIA) showing U.S. crude oil inventories recorded their largest weekly gain since Sept. 2012, caused a selloff.
"It is the unexpected big build which caused the further sell-off," said Christopher Bellew, trader at Jefferies Bache.
U.S. crude inventories rose by 6.81 million barrels to 370.54 million last week, the EIA data showed. The largest build was recorded in the U.S. Gulf Coast region where oil stocks rose by 4.9 million barrels to 188.6 million barrels.
News that Janet Yellen would be nominated as the next head of the U.S. Federal Reserve boosted the U.S. dollar from an eight-month low against major currencies, also hitting oil.
Yellen is seen largely sticking to the policies of her predecessor Ben Bernanke, which are aimed at keeping economic recovery on track.
A strong U.S. currency makes dollar-denominated oil more expensive to import.
Clashes in Egypt and the capture by U.S. forces of a senior al Qaeda figure in Libya over the weekend raised the risk of disruptions to supply from key oil producing areas in North Africa, offering some support to crude in recent days.
The International Monetary Fund (IMF) warned on Tuesday that possible supply disruptions may push oil prices as high as $150 per barrel next year in two out of three scenarios described in its World Economic Outlook.
But it also cut its world growth forecasts for the sixth straight time in less than two years, saying a stronger performance in the most advanced economies would not make up for sluggish expansion in the developing world.
"If Asia continues to weaken I think it will start to affect Brent," Olivier Jakob, oil analyst at Petromatrix, said.
U.S. crude stocks rose more than expected last week as refineries cut output, the American Petroleum Institute said. Crude inventories rose 2.8 million barrels, versus analysts' expectations for an increase of 1.5 million barrels.
In its monthly report, the EIA said global oil markets would be better supplied in 2014 than previously forecast. It saw oil demand growth next year at 1.17 million barrels per day, a fall of 20,000 bpd from the Sept. forecast.
(Additional reporting By Jacob Gronholt-Pedersen; editing by James Jukwey and Keiron Henderson)