Morgan Stanley cut its Brent forecast for next year to US$100, down from $130 previously because of increasing supply and a weaker demand outlook.
Production capacity in Opec will climb almost 800,000 barrels a day (bpd) next year, led by the return of Libyan fields, said Hussein Allidina, the head of commodities research at Morgan Stanley in New York. Non-Opec output will rise by 225,000 bpd.
Slowing global economic growth should weigh on oil demand, with consumption forecast to increase by 600,000 bpd next year, down from a gain of 950,000 bpd this year and 2.7 million bpd last year.
Risk aversion should drive strength in the US dollar, which will be a headwind for oil prices, Mr Allidina said. "Brent has experienced significant sell-offs this summer," he said.
The dollar index, which tracks the currency against those of six US trading partners, has risen 5.1 per cent in the past month. Crude for November settlement is down 10 per cent in the same period on the ICE Futures Europe exchange based in London.
The global financial crisis rocked the economies of Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman. A 75 per cent slide in Brent oil prices over six months, to $35 a barrel, put pressure on growth. Mr Allidina said a repeat of 2008 was unlikely without a collapse in global GDP. "Leading indicators are weak, but not pointing to a collapse," he said.
Concern that Greece will default has rocked global markets and wiped out foreign investment in Gulf equities since last month.
A drop in oil prices could make it more difficult for Gulf economies to fund social packages, pledged during the Arab Spring, and infrastructure projects. Markets are fixated on the minimum levels that countries need to balance their budgets.
"For now we are OK, unless we end up on a sustained downward trend and there is a huge slowdown worldwide," said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi.
