Is a slightly higher oil price target for 2016 good news or bad news? That is what oil executives, investors and consumers have to consider on Monday. The answer might seem obvious, but reality may be a bit different. JPMorgan has increased its oil price forecasts for 2016, but it has also lowered its U.S. domestic production targets.
JPMorgan has raised its target to $54.75 for Brent Sea crude, from $52.50 per barrel. Its West Texas Intermediate (WTI) crude target was raised to $51.75 per barrel from $46.50 per barrel.
Despite JPMorgan noting more supportive demand metrics and transportation fuel demand, the firm sees U.S. production down by 100,000 barrels per day.
It should seem like good news that any price target gets hiked. The more realistic view is that oil price and demand forecasts remain low enough that many oil and gas players just are not going to be very profitable — or profitable at all.
So, as far as why this might be good news, some firms and companies are still using a return to $60.00 in WTI. This newly revised higher target is far lower than $60.00.
WTI was just under $44.00 Monday morning. That is down from $48.00 earlier last week, as well as down from just over a near-term recovery peak of $50.00 a month ago.