Just how low can the BP share price go in 2024?

The BP share price looked great value last week so Harvey Jones invested some money in it. After this morning’s fall, it looks even better value. What should he do?

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Ouch – the BP (LSE: BP) share price has just fallen again. It’s today’s biggest FTSE 100 faller, plunging almost 5% this morning, on a day when most of the index got off to a flying start.

Commodity stocks such as Anglo American and Glencore are racing out of the traps as investors celebrate more Chinese stimulus, but BP shares are heading backwards. So is the Shell share price. It’s today’s second biggest faller.

That’s a blow for me because only a week ago I declared BP to be the bargain of the millennium. I put my money where my mouth is, and bought it a few days later.

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Needless to say, I haven’t done well. So what’s up?

The oil price is under pressure

Saudi Arabia has apparently given up on attempts to drive the oil price back up to $100 a barrel, and is ramping up production to protect market share. This is a tacit admission that its longstanding post-war role has changed. Saudi is no longer the global swing producer. That crown now belongs to the US, thanks to shale. It’s a huge strategic shift.

It’s not the end of the world for BP. Brent crude is still above $72 a barrel, while it can break even with oil at $40 or possibly even $30. I can console myself with the dividends I’ll be getting, as BP now has a bumper trailing yield of 5.87%.

I’m curious about one thing, though. One of the biggest worries about investing in BP, or any energy giant, is that the world is supposedly racing to end its dependency on fossil fuels.

BP could fall even further

BP has struggled to keep pace with the energy transition leaving it vulnerable as renewables take over. Yet here we are, and BP is struggling because the world is pumping more and more oil, rather than less.

Investors like me have to ignore big macro factors like that. A few years ago, BP was supposed to fall because of the ‘peak oil’ scare. Instead of running out, we’re swimming in the stuff. Yet BP is struggling. Who knew that would happen? I didn’t.

I’ll stick to what I do know. BP has a long and proud track record. Its shares are down 25% in a year. They trade at just 6.06 times earnings, a fraction of the FTSE 100 average P/E of 15.4 times. The energy sector is famously cyclical. Best to buy when shares are down. This looks like an opportunity to me.

Created with Highcharts 11.4.3Bp P.l.c. PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Brokers following BP have set an average one-year price target of 523.8p, up 36.23% from today’s 382p. Frankly, its shares could go anywhere. I could easily see it ending the year below 350p but the world still runs on oil and one day, BP will bounce back. I’m aiming to buy more of its shares before it does.

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Bp P.l.c. and Glencore Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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