Goldman Sachs slashes oil price forecasts

LONDON (Reuters) - U.S. bank Goldman Sachs slashed it oil forecasts on Monday, saying fuel prices needed to stay low for much longer in order to curb production and end a global supply glut.

Goldman Sachs oil analysts led by Jeffrey Currie said the collapse in oil prices over the last six months, which has brought North Sea Brent crude down almost 60 percent to below $50 a barrel, would eventually balance the market.

But they said crude oil prices could come down much further in the short term, possibly into the high $30s a barrel before the market saw a rebound.

Goldman Sachs is one of the most influential U.S. banks in commodities markets. In 2008, when oil prices were racing up towards their all-time high at almost $150 a barrel, the bank forecast crude could hit $200.

The bank said on Monday it had cut its 2015 forecast for Brent to $50.40 a barrel from $83.75 and reduced its 2015 WTI price forecast to $47.15 per barrel from $73.75.

For 2016, Goldman Sachs sees Brent at $70 and WTI at $65, down from $90 and $80 respectively.

In the short term, Goldman Sachs was even more bearish:

"To accommodate the substantial expected first half inventory build and using the storage arbitrage to the one-year ahead swap, we are revising down our 3-, 6- and 12-month price forecasts for Brent to $42, $43 and $70 respectively, from $80, $85 and $90," the bank said in a report to clients.

WTI 3-, 6- and 12-month price forecasts have been cut to $41, $39 and $65 from $70, $75 and $80 a barrel.

"While history would suggest that a storage blow-out would push spot prices below $35, we believe that by avoiding breaching storage capacity, the market will hover around $40, potentially dipping at times into the high $30s which we see as the likely lows of this cycle," the report said.

(Reporting by Christopher Johnson; Editing by Michael Urquhart)