Nov. 26 (Bloomberg) -- Merrill Lynch & Co. cut its 2009 oil price forecast to $50 a barrel from $90 as the global economic slump cuts fuel demand and said OPEC production cuts will likely fail to revive the market.

Merrill lowered its 2010 crude forecast to $70 a barrel from $100 and said prices may fall as low as $43 in the first quarter of next year. Iran and Venezuela have called for the Organization of Petroleum Exporting Countries to cut production again after an Oct. 24 decision to reduce supplies by 1.5 million barrels a day failed to stop the slide in prices.

Crude futures in New York have tumbled more than 65 percent from a July record of $147.27 a barrel, to trade near $51 today.

“We doubt OPEC can materially alter either market fundamentals or sentiment near-term,” Merrill oil analyst Alastair Syme in London said in a report today. “In a rapidly falling demand environment we see little that suppliers can do to either reverse sentiment or tighten market fundamentals.”

Any further reduction in OPEC supply “will be both politically problematic and unlikely to have a significant bearing until next year,” according to the Merrill report.

OPEC is likely to lower supplies before the end of the year, according to 18 of 21 analysts surveyed by Bloomberg. Twelve of the people surveyed predicted the reduction will be at least 1 million barrels a day, more than is pumped by Qatar. OPEC ministers meet Nov. 29 in Cairo and again in Algeria on Dec. 17.

Rebound Unlikely

Merrill made the price forecast revision in a separate research note by Commodity Strategist Francisco Blanch today.

“With demand vanishing across all key oil consuming regions, a strong rebound in prices in the first half of 2009 is unlikely,” he said. Earlier this month, he predicted that global demand will contract by 400,000 barrels a day next year as recession in the world’s developed economies drives down fuel demand and banks cut credit to consumers.

Merrill’s $50 estimate for 2009 prices is the second-lowest among 32 analysts tracked by Bloomberg after Australia and New Zealand Banking Group Ltd. Senior Commodity Strategist Mark Pervan, who expects average prices near $43 in 2009.

The median forecast among analysts for 2009 average West Texas Intermediate crude prices is $75.40 a barrel. That 2009 median estimate had peaked at $120 during July when oil prices were at their highest.

Merrill’s forecasts for Brent crude are the same as its West Texas Intermediate estimates from next year onward. It expects prices to average $43 in the first quarter of 2009, $45 in the second, rising to $61 in the last quarter.

“As producers continue to scale back output and the fourth quarter 2008 shock to economic activity start to fade, oil prices could begin to form a floor,” Blanch said. “We see oil prices recovering modestly in the second half of 2009.”

Merrill’s Blanch estimates that as much as 800,000 barrels a day of Canadian oil output could be cut if prices fall as low as $38 a barrel, making production unprofitable.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net

Last Updated: November 26, 2008 09:31 EST