Despite the washout still being felt across global stock and commodity markets, fossil fuel giant BP’s (LSE: BP) share price has held up remarkably well since the first bongs of New Year’s Day prompted investors to hit the ‘eject’ button.

BP has seen its share price fall just 0.5% in the year-to-date, much better than the 6% decline seen across the broader FTSE 100 index. The loss is hardly cause for fanfare, naturally, but is a remarkable performance in my opinion given the chronic downturn in crude prices.

Crude set to collapse?

Despite a healthy uptick in recent days, the Brent benchmark is still trading 17% lower from levels seen at the end of December, at $30.80 per barrel. And prices even touched their cheapest since 2003 around $27.20 last week.

And recent bumps higher are likely to prove nothing but a short-term phenomenon, in my opinion, as supply/demand dynamics in the oil sector continue to worsen.

Iran is poised to flood the market with an additional 500,000 barrels per day thanks to recent sanction removals, while fellow OPEC members Iraq and Libya are also tipped to increase production in the coming months. And Russian and US production levels are also steadily rising.

With US oil inventories rising to a fresh modern record of 486.5m barrels last week, according to EIA data, and the relentless stream of bearish Chinese data showing no signs of letting up, predictions of $10 oil from industry experts are becoming more popular by the day.

An expensive stock selection

Against this backcloth I see little but fresh pressure emerging for BP’s share price. Sure, values may have defied gravity since the turn of the year, but a worsening crude price over the past year has seen its stock value erode by a shocking 27% since last May’s highs of 484.15p per share.

Indeed, BP certainly seems chronically overvalued based on conventional earnings metrics. The City expects the oil giant to record a 6% earnings improvement in 2016, a reading that produces a P/E rating of 15.2 times.

I believe that such a prediction will prove disastrously wide of the mark as oil revenues tank — BP saw underlying replacement cost profits slump to $1.8bn in July-September from $3bn a year earlier.

But even if current projections prove to be correct, I believe current share prices still fail to reflect the chronic long-term risks facing the business and reckon a P/E rating of 10 times would be a fairer reflection of BP’s travails.

A subsequent rerating would leave the London firm dealing on a P/E rating of 233p per share, representing a whopping 34% discount from current levels around 355p.

Don’t bank on bumper payouts

Without doubt BP’s gigantic dividend yields are helping to keep the share price afloat in the current climate. The abacus bashers still expect BP to continue generating market-beating dividend yields despite rising pressure on the firm’s balance sheet — net debt galloped to $25.6bn as of September, up from $22.4bn a year earlier.

It’s true that estimated dividends of 36.8 US cents per share for both 2015 and 2016 would represent a downgrade from a 39.5 cent reward last year. But such figures still yield an impressive 7.2%.

And as profits look set to continue tanking, and further job cuts in the North Sea underline BP’s desperate scramble to conserve cash, I believe dividend hunters could end up severely disappointed.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.