Will the BP share price ever hit £5 again?

The BP share price was last above 500p in May. After falling 26% since then, our writer considers whether it will return to this level.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: BP plc

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The BP (LSE:BP.) share price peaked at 562p in October 2023. In fact, this was the highest level achieved since 2010, when the Deepwater Horizon disaster killed 11 people and resulted in 4.9m barrels of oil leaking into the Gulf of Mexico.

But it hasn’t done so well lately. It’s now around 415p.

Created with Highcharts 11.4.3Bp P.l.c. PriceZoom1M3M6MYTD1Y5Y10YALL4 Oct 20197 Apr 2025Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202020202021202120222022202320232024202420252025www.fool.co.uk

Could it reach £5 again? Let’s take a look.

Should you invest £1,000 in Osb Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Osb Group made the list?

See the 6 stocks

Analysing the figures

Given that the majority of BP’s income is generated from the sale of oil and oil-based products, it comes as no surprise to learn that its financial performance (and therefore its share price) is heavily influenced by the price of Brent crude.

As the chart below illustrates, there’s a strong correlation between the company’s operating cash flows and the cost of a barrel of oil. For the statistically minded, there’s been a 75% relationship between the two since the first quarter of 2019.

Source: BP company reports/US Energy Information Administration

In 2022, when the price of the black stuff was regularly over $100 a barrel, the group generated $40.9bn of cash from its operations. No wonder its chief executive at the time, described it as “literally a cash machine”.

Although not very tactful given that many people were struggling to afford to heat their homes, it did help to highlight the potential of the business when conditions are in its favour.

Seeing into the future

So to answer the question about whether the oil giant’s share price will break the 500p-barrier again, we need to know how Brent crude will perform over the coming months and years.

And that’s impossible to predict — its price has ranged between $9 and $133 over the past five years.

If geopolitical events, the weather, currency movements, environmental legislation, and other commodity prices wasn’t enough, global economic growth will help determine demand and the decisions of OPEC+ will play a large part in affecting supply.

That’s why some academic studies have found that assuming tomorrow’s oil price will be the same as today’s is just as accurate as the results generated from many more sophisticated models.

My opinion

However, on balance, I think now could be a good time to consider investing in BP. Although I’ve no idea whether (or when) its share price will reach 500p.

But what I do know is that the drop in its share price has pushed its current yield to 5.9%. This compares favourably to the FTSE 100 average of 3.8%.

However, it’s important to note that dividends are never guaranteed. Remember, the company halved its payout in 2020 due to the pandemic and — in cash terms — it’s now 24% lower than pre-Covid.

And despite global warming, it doesn’t appear as though we’ve reached peak demand for oil. Although there are many different predictions, Goldman Sachs, for example, expects consumption to continue to rise through until 2034.

But I don’t want to take a stake in the business. I already have exposure to the sector through my shareholding in Harbour Energy. Having two potentially volatile energy stocks in my portfolio would be too risky for my liking.

But there may be an even bigger investment opportunity that’s caught my eye:

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

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.

James Beard has no position in any of the shares mentioned. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

2 stocks that have been crushed and now offer a ton of value

Edward Sheldon has been scanning the market for stocks that offer value after the sell-off. Here are two shares he…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

£10,000 invested in Aston Martin shares at Christmas is now worth…

Aston Martin shares have fallen from above £10 in early 2020 to pennies today. Is this the perfect time for…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

Up 5% in the last crazy week! Are these 2 income stocks the ultimate FTSE defensive plays?

Harvey Jones picks out two FTSE 100 dividend income stocks that have actually climbed while stock markets are heading in…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

2 beaten-down UK shares that now look really cheap

Looking for cheap shares to consider for the long term? These two British stocks offer a lot of value right…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

As stocks tank, is this a rare chance for ISA investors to get rich?

Shares have collapsed globally and valuations are becoming, on paper at least, a lot more attractive. Dr James Fox explores…

Read more »

Investing Articles

2 strong FTSE 100 dividend shares to consider as recessionary risks increase

Looking for secure passive income stocks to consider buying as thumping trade tariffs loom? Here are two FTSE 100 dividend…

Read more »

Investing Articles

Can Greggs shares offer shelter from Trump’s tariff chaos?

Greggs' shares have plummeted in recent months. But with very little exposure to the US or tariffs, could the stock…

Read more »