By Barani Krishnan
NEW YORK (Reuters) - Crude futures fell on Friday after influential Wall Street trader Goldman Sachs cut its oil price outlook, then pared losses after a report showed a drop in the U.S. oil rig count.
Goldman lowered its 2016 forecast for U.S. crude to $45 a barrel from $57 previously, and Brent to $49.50 from $62, citing oversupply and concerns over China's economy.
Germany's Commerzbank also cut its oil price outlook on Friday, joining a long list of banks that have downgraded their crude price projections on concerns over a supply glut.
"The oil market is even more oversupplied than we had expected and we forecast this surplus to persist in 2016," Goldman said in a note entitled "Lower for even longer".
Citing "operational stress" as a growing downside risk, the Wall Street firm said crude could even fall to near $20 a barrel. "While not our base case, the potential for oil prices to fall to such levels ... is becoming greater as
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storage continues to fill."
U.S. crude futures' front-month contract was down 80 cents, or 1.7 percent, at $45.12 a barrel by 1:20 p.m. EDT (1720 GMT).
The front-month in Brent, the global benchmark for oil, was off 30 cents, or 0.6 percent, at $48.59.
Both crude benchmarks fell about 3 percent, then pared losses after a recovery in Wall Street share prices and news of the lower rig count.
U.S. stocks bounced off session lows ahead of a Federal Reserve meeting next week that will decide whether to raise U.S. interest rates. Equity markets have provided direction to oil since the end of August as investors grappled with mixed fundamentals for crude.
Oil services firm Baker Hughes said U.S. drillers idled 10 rigs this week, cutting activity for a second week in a row in sign that price declines were discouraging producers.
Crude prices have more than halved over the past year, with Brent tumbling from nearly $120 a barrel in the middle of 2014 to below $43 last month. Prices collapsed as a global glut of crude pushed commercial and government inventories to all-time highs.
Analysts say the market is rebalancing, but high stocks will keep weighing on prices into next year.
Investors shrugged off a report from the Paris-based International Energy Agency, which suggested that OPEC was successfully defending market share by keeping output steady in the face of lower prices.
(Additional reporting by Lisa Barrington and Christopher Johnson in London and Meeyoung Cho in Seoul; Editing by Nick Zieminski and David Gregorio)