BP share price has lost its bullish momentum as the price of oil and gas recoils. The stock has also dropped as investors price in the possibility of a recession in the coming months. BP shares are trading at 382p, which is about 19% below the highest point this year of 456p. Other energy shares like Tullow Oil, Shell, and ExxonMobil have all retreated.
Is BP a good investment?
BP has had a relatively mixed performance in 2022. The firm’s business has been helped by the relatively higher demand around the world. At the same time, the company has suffered because of the crisis in Ukraine that saw it report a $20.4 billion loss in the first quarter. Nevertheless, its underlying replacement cost profit rose to more than $6.2 billion, while the reduction of equity was about $14.7 billion.
BP has also worked to boost its balance sheet. It announced that it reduced its net debt to over $27.5 billion even as it added its share buyback by $2.5 billion. In addition, analysts believe that the company will boost its assets by adjusting the value of its assets. Recently, Shell adjusted the value of its assets by more than $4.5 billion.
BP share price will next react to the ongoing volatility of oil prices. Brent has dropped to about $105 from the year-to-date high of more than $136. Still, we believe BP will do well in the next few months as oil prices are expected to remain above $85. At the same time, the company will benefit from the soaring demand during summer, even as prices at the pump remain elevated.
Analysts have mixed views about the future of oil. For example, the International Energy Agency (IEA) believes that the soaring prices will lead to demand destruction, which will lower prices. However, in a separate report, Energy Aspects believes that oil will rise to $130 per barrel.
BP share price forecast
Turning to the four-hour chart, we see that the BP stock price has come under intense pressure in the past few weeks. The stock has managed to drop below important support levels at 410p and 371p. It has also crashed below the 25-day and 50-day moving averages.
While all these are bearish signs, the stock has also formed a falling wedge pattern that is shown in purple. Therefore, the stock will likely bounce back since a falling wedge is usually a bullish reversal sign. If this happens, the next key resistance point to watch will be at 400p. A drop below the support at 350p will invalidate the bullish view.
