LONDON Brent crude oil fell below $85 a barrel on Monday after Goldman Sachs slashed its price forecasts, citing abundant supply and lacklustre demand despite a pick-up in global economic growth.
The U.S. investment bank said in a research note on Sunday that it had cut its forecast for Brent to $85 a barrel from $100 for the first quarter of 2015 and reduced its projection for U.S. crude to $75 from $90.
The bank said Brent could fall to $80 a barrel in the second quarter of 2015, with U.S. crude dipping as low as $70 while rising production in non-OPEC countries outside North America outstripped demand.
Goldman Sachs' move makes it the most bearish of major financial institutions that have been cutting estimates in recent weeks.
Brent for December fell to a low of $84.75, down $1.38 a barrel, and was trading at around $84.80 by 1250 GMT. U.S. crude for December was down $1.00 at $80.01 a barrel.
"Goldman Sachs' downgrade reinforces the dismal outlook," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. "Bearishness prevails and the market is still in the process of trying to find a new floor."
Deutsche Bank also cut its oil-price forecasts sharply on Monday, reducing its projection for Brent in 2015 to $88.75 a barrel from $103.25 and cutting its U.S. crude oil forecast for 2015 to $80.50 from $96.25.
"The market is worried about further weakness. Doubts beget doubts as there are no indications of a clear sign of recovery in demand, while supplies are no doubt in excess," said Ken Hasegawa, commodity sales manager at Newedge.
"It's not at the stage where participants could buy oil wholeheartedly believing it's a bargain now."
Oversupply has helped build up oil inventories worldwide.
In the United States, for the first time since January, crude futures look poised to flip into contango, a structure in which prompt prices are below longer-dated contracts, typically signalling a weaker market.
The 12-member Organization of the Petroleum Exporting Countries meets on Nov. 27 to consider adjusting its output target of 30 million barrels per day for the first half of 2015. So far only a minority of members have called for an output cut.
Saudi Arabia has previously sent signals it is comfortable with lower oil prices and willing to maintain high supply levels to compete for market share.
Kuwait's oil minister has said there is no negative effect on its development plan from lower oil prices, state news agency KUNA reported on Sunday.
Global oil supply remains high despite disruption in producers such as Iraq and Libya.
Yemen resumed exports from its main oil pipeline on Saturday, a day after an attack by tribesmen temporarily halted flows, industry sources said.
"The oil market needs a reaction from OPEC to these lower prices, one way or another," said Weinberg at Commerzbank.
"OPEC either needs to say it is no longer going to protect prices and let the market find its own level, or that it will step in and balance the market by cutting production."
(Additional reporting by Osamu Tsukimori in Tokyo; Editing by Jason Neely)