BP share price has been in trouble recently. It has dropped by more than 10% since December 10, when it reached a multi-month high of 287p. Today, the oil supermajor shares are trading at 254p even as oil prices continues to do well.
What happened: 2020 was a bad year for BP and other oil companies like Shell and ExxonMobil. Indeed, the United States Oil Fund (USO), the biggest oil ETF in the world, dropped by more than 70%.
BP did better as its stock tumbled by about 46% while Royal Dutch Shell share price fell by 44%.
This underperformance was mostly due to lower crude oil prices and the laxk of demand as most countries placed limits on local and international travelling. This affected demand, which is bad for BP.
The company slashed its dividend for the first time in a decade after it made a record loss in the second quarter. It also announced a large write-down due to low oil prices. The firm lowered its long-term oil price forecast to between $50 and $60, down from the previous $70.
Meanwhile, BP was also a victim of the ongoing transition to ESG investing. More large investors announced that they will exit the oil and gas industry. This pushed the company to announce an ambitious target to lower its emissions.
BP share price forecast
On the daily chart, we see that BP stock price has attempted to bounce back from its lowest level in 2020. Precisely, it has risen by more than 35% from the yearly low.
But in the past few weeks, it has come under intense pressure, which has seen it erase some of the earlier gains.
It is on the same level as the 50-day exponential moving average and slightly below the 200-day EMA. Therefore, in the near term, I suspect that BP share price will drop to about 220p and then bounce back later this year. That’s because the shares have formed a head and shoulders pattern, which is viewed as being bearish.
BP technical chart