Wed Jan 7, 2015 7:28am EST

Bank of America Merrill Lynch said Brent prices could reach $40 per barrel in the near term, leaving producers, including Saudi Arabia, with no alternative but to cut output.

"We see a growing risk of WTI and Brent falling to $35 and $40 per barrel near-term to force either non-OPEC producers or Saudi to cut," the bank said in a research note on Tuesday.

The bank said the term structure of oil continues to weaken and inventories are piling up, setting the stage for lower prices in the first quarter of this year.

BofA Merrill said to find a floor, the oil market needs to see non-OPEC supply curtailments, OPEC output cuts, or stronger global demand, but none of these seem to be materializing at the moment.

Brent crude oil fell below $50 a barrel for the first time since May 2009 on Wednesday and reached a low of $49.66, hammered by a growing supply glut and weak global demand.