* Analysts scramble to cut oil price forecasts
* Standard Chartered says oil could drop to $10/barrel
* Traders take record short positions
By Henning Gloystein
SINGAPORE, Jan 12 U.S. crude prices continued a
relentless dive early on Tuesday approaching a 20 percent drop
since the beginning of the year as analysts scrambled to cut
their 2016 oil price forecasts and traders bet on further price
U.S. crude West Texas Intermediate (WTI) were trading
at $31.34 per barrel at 0805 GMT on Tuesday, down 7 cents from
their last settlement and almost 19 percent lower than at the
beginning of the year. WTI has shed over 70 percent in value
since the downturn began in mid-2014.
Trading data showed that managed short positions in WTI
crude contracts, which would profit from a further fall in
prices, are at a record high, implying that many traders expect
further falls (see chart).
Analysts also adjusted to the early price rout in the year,
with Barclays, Macquarie, Bank of America Merrill Lynch,
Standard Chartered and Societe Generale all cut their 2016 oil
price forecasts on Monday.
"A marked deterioration in oil market fundamentals in early
2016 has persuaded us to make some large downward adjustments to
our oil price forecasts for 2016," Barclays bank said.
"We now expect Brent and WTI to both average $37/barrel in
2016, down from our previous forecasts of $60 and $56,
respectively," it added.
But it was Standard Chartered that took the most bearish
view, stating that prices could drop as low as $10 a barrel.
"Given that no fundamental relationship is currently driving
the oil market towards any equilibrium, prices are being moved
almost entirely by financial flows caused by fluctuations in
other asset prices, including the USD and equity markets," the
"We think prices could fall as low as $10/bbl before most of
the money managers in the market conceded that matters had gone
too far," it added.
(Editing by Michael Perry)