The US-based financial giant JP Morgan has raised projections for Energy stocks as it believes the falling Australian dollar will offset the falling prices in crude oil. The bank believes that the AUD will continue to fall over the next year. "We continue to expect the Australian dollar to decline over the course of the year. Our September 2015 target remains 72 US cents and our March 2016 target is 70 US cents." As the AUD falls, JP Morgan believes the decline will provide a “partial offset to the bearish oil tilt” by raising company earnings. The bank incorrectly forecasted the price of Brent crude oil at the end of March. It admitted that the incorrect forecast was a “significant tracking error” due to the unexpected surge in US inventories and the rise in Iranian and Libyan supply.
JP Morgan is projecting that Buru Energy (ASX:BRU) will increase 191 per cent to 96c per share by December. Senex Energy is expected to increase by 78 per cent, Santos Limited (ASX:STO) by 55 per cent and AWE Limited (ASX:AWE) by 48 per cent. Shares for other energy operations such as Drillsearch (ASX:DLS) and Oil Search (ASX:OSH) are expected to rise 8 and 3 per cent respectively. Analysts for the US bank also noted some weakness in the Australian energy sector. Shares of Woodside Petroleum (ASX:WPL) are expected to fall 2 per cent while Beach Energy (ASX:BPT) is expected to fall 26 per cent. JP Morgan said part of its recommendations were influenced by its long-term forecasts for oil prices, which it predicts will reach $US90 per barrel by 2019. However, the bank also noted that “oil needs to go down before it can go up again.”