Although "tank tops" - a term referring to storage capacities hitting their maximum - were unlikely, Goldman said that inventories were already "too close for comfort", bearing the potential for a sharp fall in crude prices.

"Distillate storage utilization in the U.S. and Europe is nearing historically high levels, following near record refinery utilization, only modest demand growth (especially relative to gasoline), and increased imports from the East on refinery expansion and Chinese exports," Goldman Sachs said.

"This raises the spectre of 1998 (and) 2009 when distillate storage hit capacity, pushing runs and crude oil prices sharply lower," it added in its note to clients.

Crude oil prices have fallen by almost 60 percent since June last year, with production from producers in the Middle East, Russia and North America consistently above global demand.

As a result, Goldman said it did not expect oil markets to re-balance next year, a term used to describe a market in which supplies and demand are at similar levels.

(Editing by Tom Hogue)

By Henning Gloystein