The BP (LSE:BP.) share price has been on a bit of a rally. Since taking a tumble in April, the oil & gas giant has recovered and continued to grow by almost 34%. And that’s before counting the extra gains from dividends.
But will this momentum continue into 2026? And could the rally accelerate to the point where BP shares double next year?
How the shares could double
Expanding from a £70bn enterprise into a £140bn one is no easy task, even with market momentum on its side. So if BP wants to try and pull this off, a few things need to happen.
First and foremost, oil and natural gas prices would probably need to surge significantly ahead of the current average $60 per barrel predictions. To trigger this surprise deviation, either demand needs to suddenly go through the roof or supply to drop sharply.
Out of the two, disruptions to global production or supply chains are more likely to cause immediately price adjustments. But sadly, such an event isn’t exactly predictable.
Beyond a stronger commodity price environment, BP would likely also need to show progress on its new strategic direction.
With leadership now focusing more capital into hydrocarbon assets, the business is better positioned to benefit from increases in oil & gas prices.
But these projects also often come with higher operating expenses than renewables. Therefore, management will have to demonstrate its ability to deliver a higher return on investment. And if the business can also show significant progress in reducing its leverage, then investor sentiment surrounding BP could trigger a share price surge.
What should investors expect in 2026?
While the outlook for BP and the energy sector as a whole seems to be mostly bullish, I think it’s unlikely this industry titan will double its size in 2026. While it isn’t impossible, such a drastic expansion requires flawless execution alongside an unexpected commodity price surge. And the latter would likely encourage even more windfall taxes.
With that in mind, most institutional analysts have posted share price targets ranging from 450p-530p, driven by the expectation of further incremental improvement in cash generation as well as new discoveries.
Compared to where BP shares are trading today, that suggests a potential capital gain ranging from 1.1% to 19.1%, topped up by the current 5.4% dividend yield.
Assuming these projections are accurate, that means a £1,000 investment today could grow to as much as £1,245 by this time next year. That’s still not bad considering the UK stock market average return is typically closer to 8%.
However, there are still some crucial risks to consider. For example, if commodity prices decide to move in the wrong direction, profits will follow, potentially compromising dividends in the process due to the ongoing pressure of having $74.8bn of debt & equivalents on its balance sheet.
Nevertheless, for investors seeking to diversify into the energy sector, BP shares may still be worth a deeper investigation as a long-term compounder rather than a short-term sudden growth investment.
