Merrill Cuts 2008 Crude Forecast to $78 a barrel

Merrill Lynch has cut its price forecast for U.S. crude oil for the fourth quarter of 2008 to $78 a barrel from $107/bbl, the U.S. bank said on Wednesday.

The firm also said its 2009 forecast for U.S. crude oil of $90 a barrel was "at risk."

Merrill maintained its view that a global recession next year could push oil prices down to $50 a barrel.

"Demand for physical commodities is tanking in many parts of the world, with U.S. consumption contracting at the sharpest rate since 1980," the bank said in a research note.

"More importantly, we are starting to see signs of oil demand slowing in emerging markets."

Oil has fallen more than 50 percent from a record peak of $147.27 in July, depressed partly by falls in demand in the United States, the world's biggest energy consumer, where the credit crisis has begun to hurt the wider economy.

Merrill said as U.S. oil stockpiles continue to build over the coming months, U.S. crude futures could see a more pronounced contango.

A contango is a market structure where prices nearby are lower than those further forward.

"With stocks around Cushing starting to build, oil timespreads could weaken very rapidly," the bank said.

Cushing, Oklahoma is the delivery point for the New York Mercantile Exchange.

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