UPDATE 1-Citigroup raises long-term oil, natural gas price view

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Oct 15 (Reuters) - Citigroup raised its long-term crude oil and natural gas forecast, and said with a weak U.S. dollar and a seemingly resilient demand, perceptions of 'sustainable' oil prices continue to move up.

"Supply/demand do not explain oil at current levels: instead traditional fundamentals remain displaced by an increasingly short-term technical model with refining and financial interest," the brokerage said in a note to clients.

In its technical outlook for crude oil prices, Citigroup said, with a support level of around $77 and resistance level of about $85, a run at $90 is now seen as reasonable.

Record oil prices have not occurred in isolation. In the context of a weak U.S. dollar, this mitigates the impact on the global economy and strengthens OPEC resolve to offset deteriorating U.S. dollar revenues, the brokerage said.

The brokerage raised its long-term forecast for crude oil to $60 per barrel from $55 and that for natural gas to $7.50 per thousand cubic feet from $7.0.

Citigroup also adjusted its 2008 WTI oil forecast to $70 a barrel from $60. For 2009, it has a price forecast of $65 per barrel.

Citigroup said fundamentals are bullish for natural gas long term, due to steepening base production decline rates.

It expects this trend to continue long term, suggesting it will become increasingly difficult for producers to maintain flat production. (Reporting by Ratul Ray Chaudhuri in Bangalore)