Oil slips towards $68 after Morgan Stanley cuts price forecast

LONDON (Reuters) - Brent crude oil fell more than a dollar to around $68 a barrel on Monday, just above five-and-a-half year lows, after Morgan Stanley cut its forecasts, saying oversupply would peak next year after OPEC decided not to cut output.

"Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015," Morgan Stanley analyst Adam Longson said.

In a report dated Dec. 5, the investment bank cut its average 2015 Brent base case outlook by $28 to $70 per barrel and for 2016, by $14 to $88 a barrel.

Brent crude for January was down 90 cents at $68.17 a barrel by 0900 GMT (04:00 a.m. EST), having fallen more than a dollar to an intraday low of $67.73, near last week's trough of $67.53, which was its weakest since October 2009.

U.S. crude was down 70 cents at $65.14 a barrel, after hitting a session low of $64.63. The U.S. contract, also known as West Texas Intermediate, touched $63.72 last week, its lowest since July 2009.

At a meeting last month, top oil exporter Saudi Arabia resisted calls from poorer members of the Organization of the Petroleum Exporting Countries to reduce production, fuelling a further slide in prices, which have lost more than 40 percent since June.

"Brent is moving into the $60 to $70 trading range," said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.

"There is nothing really providing strong support for crude oil right now," he added.

Mixed Chinese trade data further unsettled prices.

China's imports shrank unexpectedly in November, falling 6.7 percent, while export growth slowed, fuelling concerns the world's second-largest economy could be facing a sharp slowdown.

China's crude oil imports rose 9 percent in November from October to 6.18 million barrels per day, suggesting the country may be boosting its reserves.

"If one looks at the overall economic indicators, they are all showing a picture of China which is stagnating rather than having strong growth," said Jakob.

(Additional Reporting by Manolo Serapio Jr in Singapore and Adam Rose in Beijing; Editing by Christopher Johnson)

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