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The BP (LSE: BP) share price has offered comfort and solace throughout recent stock market volatility.
When much of the FTSE 100 took a tumble due to the war in Iran, the oil and gas giant had other ideas. Its shares climbed instead, as investors anticipated a surge in revenues and profits courtesy of rising oil and gas prices.
On 28 April, BP duly delivered. Q1 results revealed a 40% jump in underlying operating profit to $6.3bn, blasting through the $5.9bn expected. Oil trading revenues flowed, as customers battled to secure supplies with the Strait of Hormuz closed.
Q1 ended on 31 March, so the real rewards from the rising oil price won’t appear until its Q2 results, due on 4 August.
How well has this FTSE 100 stock done?
With Brent crude spiking at $118 a barrel on 29 April, the only way for BP shares appeared to be up. But there was one concern.
Whenever Donald Trump hinted at peace in Iran, the BP trade moved the wrong way. Markets rose, BP fell. Investors duly noted, and resisted the temptation to drive its shares too high. In retrospect, that looks like a wise move.
Today, Brent crude trades at around $72 a barrel. That’s a drop of 46%. BP shares have fallen too. They’re actually down almost 18% over three months. Loyal investors won’t be complaining too much. They’re still up 30% over the last year, with some juicy dividends on top. The trailing yield is 5.2%.
All stocks go through their ups and downs. Short-term volatility is the price investors pay for the long-term outperformance of equities. BP has gone through more than most. The oil price plunged to a low of $24 a barrel in March 2020 during the pandemic, and peaked at around $112 in May 2020, due to the Ukraine oil shock. Its shares broadly followed suit.
Does the downturn start now?
If the Middle East settles down, both the oil price and BP could have a lot further to fall. The International Energy Agency has forecast a massive global oil supply glut by 2027, as peace unlocks stranded Gulf crude.
The IEA projects that global production will surge by 8m barrels per day to 110m, while demand will recover by just 2m. Welcome news for motorists and the global economy, but bad news for BP shares.
They look decent value today, with a forward price-to-earnings ratio of just 7.3. The forecast yield is 5.38%, so with luck the income should keep flowing. But I’m wary of buying the stock today. I’m not expecting a brutal sell-off, as I think prospects of peace and that IEA forecast should be priced in. But I wouldn’t be surprised to see the shares continue their slide.
BP is a cyclical stock, and won’t be down forever. Even with the climate crisis, the world will still need oil and gas. So, it’s still worth considering. I’ll prepare to take advantage of any bigger dips further down the line.
Should you invest £5,000 in Bp P.l.c. right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Bp P.l.c. made the list?
Harvey Jones owns shares in BP.
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