* Brent seen back at $105 in "coming months" - Goldman
* IEA says high prices slowing growth in oil demand
* Coming up: API oil inventory data, 4:30 p.m. EDT Tuesday
(Adds Saudi, IEA details)
By Robert Gibbons
NEW YORK, April 12 (Reuters) - Oil fell sharply on Tuesday,
with U.S. crude down over 7 percent in two days, as Goldman
Sachs warned again of a price reversal and the International
Energy Agency said high prices could be eroding demand.
News that lackluster demand caused Saudi Arabia to reverse
a recent output hike designed to make up for production shut
down by Libya's conflict also weighed on the market.
Brent crude for May <LCOc1> fell $3.28 to $120.70 a barrel
by 11:21 a.m. EDT (1521 GMT).
U.S. crude <CLc1> lost $3.75 to $106.17.
Investors that bought into the oil market in the past few
months could now be making a move to exit, according to Brendan
Brown, head of economic research at Mitsubishi UFJ Securities.
"I think we are going to see some sort of a rotation, with
some investors deciding to get out and take some profit," Brown
told Reuters.
That seemed to be Goldman Sachs' <GS.N> message for the
second straight day on Tuesday.
Goldman expects Brent to fall toward $105 in coming months,
the bank said in a note emailed to clients on Tuesday, a day
after the bank recommended closing its 'CCCP Basket' trade,
which includes a 40 percent weighting in U.S. crude futures.
[] []
SAUDI REVERSES OUTPUT HIKE
Sources told Reuters that top exporter Saudi Arabia, holder
of the most spare production capacity in the Organization of
the Petroleum Exporting Countries, had trimmed production by
around 500,000 barrels per day to around 8.5 million bpd
because of slow demand. []
Saudi Arabia's production cut comes amid increasing
concerns about high oil prices.
High prices are beginning to dent growth in oil demand,
Western consuming nations' energy policy adviser the IEA said
on Tuesday. []
The IEA said few expect OPEC to agree formally to raise
output and that could mean prices will correct and fall back
because of a global economic slowdown. []
"Fear of demand destruction is killing this market. There
is a feeling that the recent rally lifted oil prices to
unsustainable levels," said Phil Flynn, analyst at PFGBest
Research in Chicago.
"The price of gasoline is now skyrocketing and that could
lead to lower demand. At the same time, the supply risks
arising from turmoil in the Middle East and North Africa have
largely been priced in."
(Additional reporting by Gene Ramos in New York, Ikuko
Kurahone, Dmitry Zhdannikov and Zaida Espana in London and
Chikako Mogi and Risa Maeda in Tokyo; Editing by Dale Hudson)
