* BHP sees copper, oil prices recovering in medium term
* Reaffirms copper, coal, petroleum production forecasts
* Trims iron ore output forecast in wake of Brazil dam burst (Adds analyst comment, details on 2016 guidance, share price)
By Sonali Paul
MELBOURNE, Jan 20 (Reuters) - BHP Billiton BHP.AX BLT.L flagged on Wednesday that it sees no recovery in iron ore or coal prices in the next few years, while holding out hope for a rebound in copper and oil as it fights slumping earnings set to hit its long-protected dividend.
The top global miner reinforced the bleak outlook for most commodities in the near term, with markets slammed by oversupply as the economy slows in China, the world's biggest metals consumer.
In a sign the company may cut its dividend, ending a long-held policy to maintain or raise its payout every year, BHP Chief Executive Andrew Mackenzie said in a quarterly production report that it was focused on defending its investment grade credit rating.
"In this environment, we are also committed to protecting our strong balance sheet so we have the financial flexibility to manage further volatility and take advantage of the expected recovery in copper and oil over the medium term," Mackenzie said.
He made no mention of any recovery in iron ore or coal prices.
BHP is reeling as oil prices have slumped further than expected at the same time as its other products have plunged to multi-year lows. Average prices for its commodities slumped between 20 and 51 percent in the first half of its financial year compared to a year earlier, with crude oil worst hit.
BHP shares fell 4 percent on Wednesday to their lowest in over a decade at A$14.14 as oil prices sank to their weakest since September 2003.
DIVIDEND CUT?
Analysts said the production report was largely in line with forecasts, adding that they were watching for further spending cuts when BHP reports financial results in February.
"We have written that BHP will either need to meaningfully cut future capex or its dividend, and we stick to that view," said Clarksons Platou analyst Jeremy Sussman.
As expected, the company trimmed its full-year forecast for iron ore output by 10 million tonnes to 237 million tonnes, following a dam burst at the Samarco venture in Brazil that killed 17 and devastated a nearby village.
BHP reaffirmed guidance for declines in copper, coal and petroleum output in the year to June 2016. It has slashed the number of rigs at its U.S. shale fields amid the collapse in oil prices.
Copper output is still expected to fall 12 percent to 1.5 million tonnes, metallurgical coal down 6 percent to 40 million tonnes and thermal coal down 2 percent to 40 million tonnes from a year earlier.
BHP's oil and gas output, which sets it apart from other big miners, fell 5 percent to 60.2 million barrels of oil equivalent (mmboe) in the December quarter. However it still sees full-year petroleum output at 237 mmboe, with offshore production helping to offset shale declines.
BHP produced 57 million tonnes of iron ore in the December quarter. Quarterly copper output fell 9 percent to 400,000 tonnes because of lower grade ores at the Escondida mine in Chile.