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After dipping below $80 per barrel, crude oil settles a penny lower, at $81

U.S. oil prices settled modestly lower on Monday after touching a 28-month low earlier after Goldman Sachs slashed its price forecasts amid further signs of lackluster demand and booming supply.

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Weaker-than-expected U.S. pending home sales data at mid-morning sent the dollar index lower, pepping up dollar-denominated commodity markets across the board.

Goldman Sachs 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, making it the most bearish bank on Wall Street.

U.S. crude for December settled 1 cent lower at $81.00 per barrel, having earlier touched a low of $79.44, its lowest level since June 2012.

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Brent for December fell to a low of $84.55 but also partially recovered.

"As we sold off (in early trade), pending home sales came out which misses expectations so the U.S. dollar came off and some buyers stepped in," said Bill Baruch, senior market strategist at futures for iitrader.com LLC in Chicago.

Baruch said the overall sentiment for crude was still bearish however, and forecast $75-$77 in U.S. crude.

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The Ifo, a key index of German business sentiment fell to its lowest level in two years on Monday, adding to concerns about weak demand and the risk Europe could slip into recession.

Meanwhile a senior Iranian oil official said the Organization of the Petroleum Exporting Countries was unlikely to reduce its production ceiling when it meets in November, according to Shana, Iran's oil ministry news agency.

"Trying to pick a bottom right now seems to be a risky thing to do ... without any production cut coming up or European activity picking up, which the Ifo did not point to," said Gene McGillian, senior analyst at Tradition Energy.