When I looked at the BP (LSE: BP.) share price last month, I was nervous. The outlook seemed grim, with OPEC+ expected to ramp up oil production in 2026 to win market share from the US. That would drive prices down, and when oil falls, BP shares usually follow.
There was even talk of crude tumbling from around $60 a barrel to $40. While BP can just about break even at that level, it can’t make the kind of profits investors’ crave, or fund the chunky dividends they hope to receive.
Oil stocks are notoriously hard to predict. The story can flip in an instant and that’s exactly what’s happened here.
Changing FTSE 100 fortunes
Only a few weeks later, OPEC+ did a U-turn. On Sunday (2 November), the cartel said it would pause planned increases in the first quarter of 2026 to prevent an emerging oil glut. Good news for BP, whose shares have climbed roughly 4.5% in the past week.
They’re now up 18.6% over 12 months, and when the trailing 5.3% dividend yield’s included, the total 12-month return climbs to almost 24%. In the space of seven days, my gloomy view has turned into something resembling optimism.
The energy sector’s cyclical, and investors need to be patient during the down swings. It actually makes sense to build a position when sentiment’s low, then wait for the cycle to turn. Right now, that may be happening faster than I thought.
Earnings beat expectations
BP’s third-quarter results, published on Tuesday (4 November), were mostly upbeat. Underlying replacement cost profit came in at $2.21bn, slightly lower than the previous two quarters but beating forecasts of $2.02bn.
Operating cash flow rose to $7.79bn, up from $6.76bn a year earlier, while capital spending dropped from $4.54bn to $3.38bn. That supported another $750m of share buybacks. BP made progress in simplifying operations and reducing costs, while divestments should exceed $4bn in 2025.
Chief executive Murray Auchincloss said: “All six of the major oil and gas projects planned for 2025 are now online, including four ahead of schedule.”
Negatives remain though. Net debt still sits at a hefty $26bn, and BP’s trading arm underperformed.
From retreat to recovery
After years of confusion over its ‘Beyond Petroleum’ strategy and activist pressure to pivot toward renewables, BP’s gone back to fossil fuel basics. It’ll use the cash to strengthen the balance sheet and reward shareholders.
Global conditions are still tough. Growth’s patchy. The US economy could slow and China’s struggling. The oil price could just as easily fall again, taking BP shares with it. But for the first time in a while, I feel BP might be over the worst.
Income-focused investors might consider buying the shares for long-term income and, with luck, the odd growth spurt. Patience will be needed but I’m starting to believe that BP might deliver more surprises, and this time they might just be pleasant ones.
