BP Share Price is at Risk of a 12% Drop – Chart

The BP share price popped on Tuesday after the company published strong financial results. The stock jumped by more than 2.52%, becoming one of the best performers in the FTSE 100. Similarly, the Royal Dutch Shell share price rose by about 0.25%.

BP earnings review

BP, the oil supermajor, had a strong quarter and half year as oil prices jumped and as demand rose. The firm revealed that its total profit for the quarter rose to more than $2.8 billion. That was a major comeback after the firm made a loss of more than $6.7 billion in the same quarter in 2020. It was also a better performance than the $2.6 billion it made in the first quarter of the year. 

Therefore, the company announced that it will return more money to investors than expected. It will repurchase shares worth $1.4 billion in a bid to increase its earnings-per-share. Further, the company also increased its dividend to 5.46 cents per share. Most importantly, the firm expects to increase its dividend by about 4% every year until 2025. This will only happen if the price of oil remains above $60. The strong results helped push the BP share price to the highest level since mid July. 

The results came a week after Royal Dutch Shell published strong results. The company made a profit of more than $5.5 billion. It also launched a $2 billion share buyback program. You can read my recent BP vs Shell share price comparison here.

The biggest risk for BP, Shell, and other supermajors is the Delta variant that could force countries to announce lockdowns. In fact, oil prices have declined by about $4 in the past few days.

BP share price forecast

A look at the daily chart shows that the BP stock price has been under pressure lately. It has dropped by about 12% from its highest point this year. It has also moved below the 25-day and 50-day moving average. That is not a good sign. At the same time, it has formed a bearish flag pattern, which is usually a bearish sign.

Therefore, I suspect that the stock will decline to the 50% Fibonacci retracement level at 262p. This price is about 12% below the current level. On the flip side, a move above 310p will invalidate this view.