The BP (LSE: BP) share price has soared 32% since the beginning of 2022. The oil major has rocketed, thanks to soaring crude prices following Russias invation of Ukraine.
But investors using AJ Bell’s investing platform are now heavily selling its shares. The FTSE 100 company accounted for 4.6% of all buy orders on the Youinvest platform in the seven days to Tuesday (18 October).
This made BP the second-most sold stock in that time, behind only Lloyds.
Meanwhile, there’s been a lack of serious interest from dip buyers. Last week, the oil business was only the 12th most bought stock with AJ Bell investors. It accounted for 2.2% of all buy instructions.
Are these investors making a mistake? Should I buy BP shares for my portfolio today?
Supply strains
As I say, BP’s share price has benefited from a period of elevated crude oil prices. And recent supply news suggests that fossil fuel values could keep rising in the short-to-medium term.
Last week, the OPEC+ group vowed to cut oil production by 2m barrels per day from November. The cartel says the move was due to economic and not political reasons. But the US White House claims that the broader group is “aligning” with member state Russia.
Either way, the move suggests high oil prices could be here to stay. OPEC+ supplies around half of the planet’s oil.
Demand and tax threats
Naturally, high oil prices play into the hands of producers like BP. Underlying replacement cost profit at this particular producer soared to $8.5bn in the second quarter. This was up considerably from $2.8bn a year earlier. And it encouraged BP to hike the quarterly dividend 10% year on year.
So why are AJ Bell investors selling the FTSE oil giant? One reason is the prospect of sinking crude prices as the global economy rapidly cools and demand shrinks. Tellingly, OPEC last week cut its world oil consumption forecasts for 2022 and 2023.
Markets also fear a windfall tax being imposed on British oil companies to help energy users pay their bills. Earlier this month, Shell chief executive Ben van Beurden claimed that such levies are “inevitable.”
The economic and political pressure on the government to introduce such a levy are rising too. On Monday, new chancellor Jeremy Hunt refused to rule out slapping billions of pounds worth of new taxes on the oil sector.
Here’s what I’m doing
It’s possible that oil prices could stay higher for longer. Supply worries could be here to stay that continue to boost BP’s earnings.
However, the risks facing oil companies in the long term are colossal as the world switches to cleaner energy sources.
In its defence, BP is investing heavily in renewables and alternative energy products to reduce its reliance on fossil fuels. On Monday, it announced a $4.1bn deal to acquire renewable natural gas producer Archaea Energy.
But the company will still rely on oil to drive profits in the future. Indeed, the amount BP is investing in greener fuels remains far below what it is spending to develop oil and gas assets.
I’m someone who buys shares for the long haul. And on balance, I’d rather buy other UK shares today.
