BP‘s (LSE:BP) share price has enjoyed an excellent start to 2026. Fuelled by a rising oil price, it’s risen a healthy 4.3% since 1 January. Can investors now expect the FTSE 100 company to continue rising?
This price rally is no sudden phenomenon. The energy giant’s recovered almost 13% during the past six months following earlier weakness, meaning a positive return of 8.7% over a year. Add in a 5.1% trailing dividend yield and its shares have delivered a total shareholder return of 12.8%. That would have turned a £10,000 investment into £11,280 today.
The rising crude price isn’t the only thing reigniting interest in BP shares. Hopes that heavy restructuring, a new oil-focused growth strategy, and a new CEO have also excited the market. Industry veteran and Woodside Energy chief Meg O’Neill will become BP’s next chief exec in April.
City analysts certainly believe the FTSE company may have turned the corner…
What’s going on?
Execution problems mean BP’s shares have been one of the worst-performing oil majors in recent years. The result, though, is that its shares still trade cheaply, which could well prompt further price gains.
At 458.9p per share, the firm trades on a forward price-to-earnings (P/E) ratio of 10.6 times. That’s lower than FTSE 100 rival Shell‘s 12.2 times, and those of US operators Exxon Mobil (20.7), ConocoPhilips (19.6) and Chevron (26.1).
The 29 brokers with ratings on BP shares are confident of more price strength. Their average 12-month target is 497.8p, up 8.5% from today’s levels. Taking into account a 5.3% dividend yield for the period, too, an investor today could enjoy a 13.8% total return, improving from that of the last 12 months.
If analysts are right, a £10k investment today would turn into £11,380 a year from now.
Are BP shares a Buy?
With a refreshed growth strategy, new leadership and that low valuation, we could well be at the start of a new era for BP’s share price. But I must confess, I still have reservations about the FTSE company’s investment case.
One reason is the uncertain outlook for oil prices. Worries over military action in Iran and its impact on crude supply’s pushed prices up recently. But can they keep rising? I’m not so sure.
On balance, the oil market’s in danger of huge excess supply as OPEC+ countries and other major producers (like the US, Canada and Brazil) turn the taps up. The demand outlook is also fragile, due to the uncertain economic picture and the ongoing green energy transition. This combination is a toxic threat to oil prices.
Finally, the company continues to struggle under a large net debt pile ($22bn-$23bn as of the end of 2025). If oil prices drop again, concerns over BP’s enormous debts will naturally resurface again. Having said that, fresh asset sales could dampen any concerns over the company’s balance sheet.
All things considered, I won’t be buying the FTSE stock for my own portfolio. It simply carries too much danger for my liking. But I’m not ruling out a strong and sustained recovery in BP’s share price. I think it could be a good stock for more risk-tolerant investors to consider.
