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Hope springs eternal, but I’m struggling to find reasons to be upbeat about the BP (LSE: BP) share price.
I bought the FTSE 100 oil giant back in the spring, when it was under fire on all fronts, hoping to take advantage of its many troubles. I knew I was taking a chance.
So much has gone wrong for BP over the last 15 years. The shift towards renewables always looked half-hearted, unsettling traditional investors without convincing green activists either. The sliding oil price has hurt all producers, but BP’s faced problems of its own, including weaker refining and gas trading margins, and operational issues.
Full-year net profits plunged 98% in 2024, down from $15.2bn to just $370m. No wonder investors turned sceptical. The board responded with strategic reviews, cost-cutting and asset disposals, as it must, with net debt still hovering around $26bn. The abrupt departure of chief executive Bernard Looney only added to the sense of turmoil.
Strategic reset risk
I’ve made a habit of buying big companies on bad news, and I knew I was taking an outsize chance with BP. Its full-blooded return to fossil fuels, an area it understands far better than renewables, may steady earnings in the short term, but it isn’t without risk. If the energy transition gathers pace, BP could find itself on the wrong side of history.
There have been positive moments. BP‘s secured a major oil discovery offshore Brazil, one of the largest global finds in decades, underlining its technical strength and long-term resource base. Yet boardroom instability hasn’t helped. Murray Auchincloss’ brief stint as chief executive did little to calm nerves, although his replacement, Meg O’Neill, arrives with a strong reputation. Still, it just seems to be one worry after another with BP.
Commodity price pressure
The biggest is the outlook for oil and gas prices. Brent crude has slid to around $60 a barrel, dragging BP shares down with it in recent weeks.
There’s growing talk of a supply glut. A peace deal in Ukraine or a revival in Venezuelan output could add further pressure, by releasing new supply. A recession could squeeze demand if we get one. Some forecasts suggest Brent could fall towards $55 a barrel in 2026. BP would still make money at that level, just a lot less of it.
Despite all these challenges, BP shares have climbed about 12% over 2025. The trailing dividend yield is 5.7%, which will tempt income seekers. BP has also been generous with share buybacks, currently running at $750m a quarter.
I’m wary though. I like the income, assuming it holds, but my real concern is long term. There’s a danger investors underestimate how quickly renewables can scale, and how cheaply they can operate. If they displace more fossil fuel production than expected, BP could feel even more old school than it already is.
High dividend income
But what’s this? Consensus brokers forecast produce a median one-year share price target of 503p. That’s up 18% on today, with dividends on top. They’re a lot more optimistic than I am.
I’m holding my BP shares for now. Anyone tempted by that high yield should think carefully before they consider buying. The only thing BP guarantees in 2026 is more volatility, in my view.
