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Oil prices down in Asian trade

Prices had already slipped in New York after US crude stockpiles surged by more than eight times the expected amount, indicating weak demand in the country.

New York’s main contract, light sweet crude for delivery in April, fell 10 cents to $90.33 a barrel and Brent North Sea crude for April dipped 26 cents to $110.80 in mid-afternoon trade in Asia on Thursday.

Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at Ernst & Young, said the market is worried that “the failure of the US Congress and the Obama administration to avoid the automatic spending cuts... could hobble US economic prospects in the coming months”.

US President Barack Obama met Republican senators for a rare dinner on Wednesday, as he sought to end the ugly budget impasse that is clouding the early days of his second term.

Obama has recently telephoned several Republicans seen as most open to dialogue on the deep ideological rift in Washington as he seeks to find a less painful way to cut spending after the $85 billion “sequester” took effect on Friday.

The cuts to defence and domestic spending will likely cost hundreds of thousands of jobs, while economists have said 0.7 percentage points could be shaved off gross domestic product.

Prices were initially rattled Wednesday on uncertainty following the death of Hugo Chavez, the president of major Latin American oil producer Venezuela.

However, analysts said they did not expect major changes in Caracas’ oil policy and officials in the country announced that an election would be held within 30 days to ensure a smooth succession.