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The BP (LSE: BP) share worth has had an okay run in 2025. Nothing particular, it’s up a modest 12%, however not too shabby both, particularly after including the 5.5% trailing dividend yield.
Efficiency regarded higher a month in the past, however the shares have sagged 7% since then, and as somebody who holds the inventory, I’ve bought the uneasy feeling that there’s much more bother to come back in 2026. Actually, I’m frightened BP is in for a correct battering.
It wouldn’t be the primary time. The Deepwater Horizon tragedy in 2010 solid a pall over the enterprise for years. Then the pandemic arrived and drove crude under $30 a barrel, hammering each oil inventory. Costs rocketed in 2022 when Russia invaded Ukraine then trailed as Europe discovered substitute sources of power, just for US tariffs to set off additional volatility.
Risky FTSE 100 large
My potted historical past reveals how BP is on the mercy of occasions past its management. It’s additionally made errors, particularly the humiliating hokey-cokey over whether or not to plunge into renewables or keep on with old-school fossil fuels.
Immediately, I’m worrying about one thing BP can’t management: a possible oil glut. Crude has been slipping for six months amid softer demand and plentiful provide. Now it’s simply suffered its worst week in two months after recent warnings of oversupply in 2026, which has despatched WTI crude oil under $60 a barrel. The Worldwide Vitality Company tried to calm nerves by taking a extra optimistic view, however merchants have been too busy promoting to note. If this continues, 2026 may very well be brutal.
At The Motley Idiot, we consider in shopping for shares with a long-term view, reasonably than attempting to second-guess oil worth actions. There are just too many shifting components. Nevertheless, we do wish to make the most of short-term dips to purchase our favorite shares at decreased costs, and bag a better yield as well. This could work significantly nicely in a cyclical sector like power. Nevertheless it requires endurance and robust nerves, as a result of struggling shares not often bounce again in a single day.
Respectable worth, excessive dividend yield
Previously, oil oversupply would appropriate itself, by squeezing out marginal producers, whereas decrease costs revive demand. But we are able to’t be 100% positive this nonetheless holds. The world additionally isn’t as beholden to grease because it was. Renewables get cheaper yearly. That makes BP extra susceptible, particularly because it’s doubled down on fossil fuels. There’s been a backlash in opposition to internet zero these days, however that might reverse too.
BP doesn’t look wildly costly with a ahead price-to-earnings ratio of 14.6. Analysts reckon the shares will yield 5.4% throughout full-year 2025 and 5.73% in 2026.
It nonetheless carries has 26bn of debt, although administration is whittling that down via disposals. Share buybacks hold rolling at $750m 1 / 4, which is reassuring, however I nonetheless suppose subsequent 12 months appears uneven. I’m not topping up my stake at right this moment’s degree, however I’ll be prepared if the shares take a correct tumble. Lengthy-term buyers may take into account shopping for BP shares right this moment, however they need to brace themselves for a full of life 2026.
