By Himanshu Ojha
LONDON (Reuters) - Oil prices steadied below $49 a barrel on Thursday after a volatile day with North Sea Brent and U.S. crude oil dipping towards near six-year lows as another big U.S. bank slashed its oil price forecasts.
Bank of America Merrill Lynch (BOAML) cut its crude oil forecasts on Thursday saying Brent could go as low as $31 by the end of the first quarter of 2015.
"Stocks all over the world are building at a very fast rate," BOAML analysts said in a note to clients, saying very high inventories would make any sharp recovery in prices much less likely.
Brent crude was down 26 cents a barrel at $48.43 a barrel by 1440 GMT, at a small discount to U.S. crude, which was trading at $48.58 a barrel, up 10 cents. The discount for North Sea crude oil reflected a very weak seaborne spot oil market, traders said.
Both crude oil benchmarks hit their lowest levels for almost six years earlier this week on a global oversupply of high quality oil.
The front-month Brent futures contract was due to expire later on Thursday, and traders said investors who had sold at higher levels in recent days and weeks were buying back futures to take profit after recent heavy price falls.
This provided some support for crude oil, traders said.
A weak dollar also helped. The dollar fell against a basket of major currencies on Thursday, after the Swiss National Bank abandoned a cap against the euro, pushing the Swiss currency up sharply and depressing the euro.
Oil and other commodities are priced in dollars and tend to gain when the U.S. currency falls.
Other news was mostly negative for oil.
In its monthly report, the Organization of the Petroleum Exporting Countries (OPEC) forecast demand for the group's oil would drop to 28.78 million barrels per day (bpd) in 2015, down 140,000 bpd from its previous expectation.
OPEC also trimmed its projection for the rate of growth in non-OPEC supply partly due to a slowdown in the U.S. shale boom.
But OPEC still expects U.S. oil production to increase by almost 1 million bpd even with the much lower oil prices.
Iraq plans to boost monthly crude oil exports from its southern ports to a record high level in February, trade sources said on Thursday.
(Additional reporting by Henning Gloystein in Singapore; Editing by William Hardy and Christopher Johnson)
