The BP (LSE: BP) share price has outperformed the FTSE 100 over the past year. Up 21%, the stock hit fresh 52-week highs earlier in November. Yet, given the uncertainty about geopolitics and its potential influence on the oil price in the coming year, I thought it wise to examine the forecasts from leading banks and brokers regarding where they expect the oil stock to go from here.
The lay of the land
Of the 26 contributors I can access, 10 have a Buy rating, 15 are at Hold, and only one suggests a Sell. Barclays is one of the most optimistic on the stock for the coming year, with a share price target of 525p. For reference, the current share price is 460p. On the other hand, the team at Jefferies is expecting it to fall to 420p over the same period.
When I look at the bigger picture, the average target price is 471.6p. Therefore, if this was correct, it would mean a 2.5% gain from the current levels. Of course, any investor needs to take these projections with a pinch of salt. Even though these experts spend a lot of time researching and doing due diligence, the results are still their subjective views. There’s no guaranteeing any of the outcomes will happen for the stock.
Mixed outlook
A big factor in the view going forward is how the oil price performs. A Ukrainian drone strike last week on Russian facilities caused a brief spike in prices over fears of supply disruption. This tension’s eased in the short term, but it goes a long way to highlighting the volatility that can be caused by geopolitics at any point in time.
If we park this to one side, the fundamental picture for oil is supportive. A continued recovery in aviation fuel demand, along with higher industrial needs from India, China and the Middle East, all point to signs that demand could tick higher. If this is the case, then the BP share price will likely mirror this. After all, the end product that BP produces can be sold for a higher price, thereby boosting revenues.
On the other hand, I see two main risks at present. The first is concern around a potential windfall tax on the business from the UK and the EU. Although this would impact the entire sector, BP would incur a significant cost here. Another risk is the commitment worth billions for low-carbon investments. If these long-term plans underperform relative to the traditional fossil fuel returns, investors might be unhappy.
Better options elsewhere
I do have a positive view on the oil price, which should help BP stock. However, I do agree with the consensus analyst view, in that I struggle to see any major catalysts that could really provide a strong rally for 2026. Given that there are other sectors like artificial intelligence (AI) where I think there could be considerable growth, I don’t see much value in considering the stock now.
