BP (LSE:BP) is one of the largest listed stocks in the UK, with a market-cap of almost £80bn. The BP share price might be down a modest 3% over the past year, but it’s a very popular stock with retail investors. I think the year ahead could be a volatile one for the stock, based on my three predictions.
Lower oil prices could be a drag
As one of the largest oil firms in the world, the performance of BP is impacted by the movement in the oil price. This can act as a benefit (as we saw when it shot above $100 per bbl in 2022). Yet based on my views for this year, it could act as a drag on share price gains.
The oil governing body OPEC+ has been voluntarily cutting output in recent months, which isn’t a good sign. Further, earlier this week Saudi Arabia announced it was cutting the price of crude oil exports. With easing demand globally at the moment, it does point to the oil price continuing to fall.
Further, the oil price did jump in Q4 following the spike in fighting between Israel and Palestine. Even though the conflict is ongoing, if this gets resolved later this year then I think the oil price could fall based on this good news.
Ultimately, if this is correct then the BP share price could struggle to rally based purely on help from the oil price.
Higher dividend potential
BP cut the dividend in half at the start of 2020 due to concerns around the pandemic. Over the past couple of years, the quarterly payment amount has been increasing again. Last year it jumped by almost 10%. Based on analyst forecasts, it’s due to jump again later this year by a similar amount.
Of course, just knowing the dividend per share amount is a bit pointless. I need to factor in the dividend yield. At the moment this stands at 4.71%.
This is comfortably above the FTSE 100 average, as well as beating the savings rate I can get on my cash right now. Therefore, the BP share price could benefit from income investors buying the stock this year.
Election year is important
This year, the most people ever will have a chance to vote at the polls. This ranges from the UK to the US, from South Africa to India.
BP gets oil from around the world. It also sells it around the globe too. Governments directly influence the end price of some products, such as the fuel duty tax here in the UK.
If we get changes in the ruling parties in some key countries then this could act as either a positive or negative for BP stock. Should more favourable corporate conditions exist, this would be great. Yet if there’s a clampdown on oil and gas production, this would hurt the firm.
At the moment it’s too early for me to tell how this will go, but my prediction is that elections will be a key factor for 2024!
