Unlike several other parts of the market, oil and energy stocks haven’t recovered since Donald Trump announced his trade policy. And this is reflected in the BP (LSE:BP.) share price, which now sits marginally above three-year lows.
Of course, corrections and crashes occasionally offer investors an opportunity. So, is this an opportunity for investors to snap up cheap BP shares? Let’s take a closer look.
What’s behind the fall?
BP’s share price has fallen significantly over the past month, largely due to the impact of Donald Trump’s tariffs and the associated sharp decline in global oil prices. The tariffs have heightened fears of a global economic slowdown, leading investors to anticipate weaker demand for oil. This has driven oil prices down from nearly $75 to around $62 per barrel, directly affecting BP’s revenues and profit outlook.
The company is also facing strategic uncertainty, having recently shifted focus back towards fossil fuels, which leaves it more exposed to volatile oil markets. Additionally, BP has warned of lower gas production and weaker trading results for the first quarter, further unsettling investors. The risk that BP may have to cut or suspend its share buyback programme has also contributed to the negative sentiment surrounding the stock.
The valuation
Central to any investment is the company’s valuation. However, investing in companies that sell fluctuating commodities can be a little more challenging. A lot can change, and very quickly.
Currently, BP is trading at 9.9 times forecasted earnings for the year. That’s based on analysts’ predictions. This number falls to 8.4 times in 2026 and then 7.6 times in 2027. This demonstrates that the firm is expected to improve earnings considerably over the coming years.
Net debt is also forecasted to fall by around $2bn during the period. This may be a modest move, but it’s still a step in the right direction.
The dividend forecast is also rather promising. The yield is forecasted to improve from 6.8% in 2025 to 7.4% in 2027 — that’s based on the current share price. What’s more, the distribution rate — the percentage of earnings paid out to shareholders — is set to become more manageable, falling from around 66% to 56%.
The bottom line
On face value, these figures are collectively encouraging. Falling debt, improving earnings, and a strengthening dividend yield. And it does make me more willing to consider BP as an investment than I have been in the past.
However, the current environment is challenging for oil due to a mix of weak demand, volatile prices, and geopolitical uncertainty. Crack spreads have collapsed, with refining margins down sharply year over year, and global oversupply is keeping prices low.
President Trump’s trade policies have further destabilised the market, causing dramatic price swings and making producers hesitant to invest. What’s more, Trump’s mantra is to keep oil prices low, and this undermines profitability for oil companies, leading to falling earnings and production cuts.
Personally, I’m not buying BP shares today. However, I can be overly cautious. I may look back on this moment as a good entry point missed.
