Goldman Sachs on Tuesday slashed its fourth quarter (Q4) 2016 oil price forecast by $7 per barrel, citing a mounting crude surplus that could outweigh any short-term price support from a potential deal among top producers to limit output.

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The Wall Street bank lowered its fourth-quarter (Q4) West Texas Intermediate (WTI) price outlook to $43 a barrel from $50 a barrel.

"With our demand outlook unchanged, with year-on-year growth of 1.4 million barrels per day, this leaves us now forecasting that inventories will build in 4Q16 by 400 kb/d (thousands of barrels per day) versus our prior expectation for a 300 kb/d draw during the quarter," the bank said in a note.

It went on to say the forecast assumes a limited additional increase in production from Libya and Nigeria of 90,000 barrels per day compared with current estimated output.

Goldman kept its 2017 average price forecast of $52 per barrel unchanged.

Crude oil futures fell on Tuesday as optimism faded for an output-limiting deal from an oil producer meeting in Algiers that has so far failed to yield any agreement to curb one of the worst supply gluts in history.  

"While a potential (oil producers`) deal could support prices in the short-term, we find that the potential for less disruptions and still relatively high net long speculative positioning leave risks skewed to the downside into year-end," the bank wrote.