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Opec may defend $50 brent crude in BofA view if demand falters

After almost a year of painfully low oil prices, Opec members are beginning to believe they are winning against upstart US shale producers in a short-term market share contest.

[LONDON] Opec may shift policy and reduce output to keep Brent crude above US$50 a barrel if demand in emerging economies falters, Bank of America Corp said.

Saudi Arabia, the group's biggest member and architect of the current strategy to defend market share, "cannot sustain its spending sub-US$40 a barrel for very long," the bank said. Still, the price of Brent should recover during the rest of the year as US supply slows and fuel demand undergoes a seasonal increase, it said.

"Opec could react to low oil prices if emerging market demand falters," Francisco Blanch, the bank's head of commodities research in New York, wrote in the report dated Aug 28.

"An Opec cut (loud or quiet) to keep prices above US$50 a barrel makes good financial sense."

The bank reduced its forecast for Brent to US$55 a barrel for next year and US$61 for 2017, from previous estimates of US$62 and US$70 respectively.

Brent, the global oil benchmark, rallied 8.2 per cent on Monday after comments in a monthly publication by the Organization of Petroleum Exporting Countries stoked speculation that the group may coordinate action with other producers to bring about "fair" oil prices.

Bank of America said the organization "may do a surprise cut" if Brent drops to US$30 a barrel as members' spending needs have "increased drastically in recent years."