BP Share Forecast January 2022 – Time to Buy BP?
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Shares of British multinational oil and gas company BP (LSE: BP) are in the red today, after closing at £364.10 as of January 24th (18:07 GMT). BP has always been a company that generates its income through the extraction, refinement, and sale of oil. While it’s not really environmentally friendly, BP has prospered from the recent surge in worldwide oil prices.
BP – Technical Analysis
BP’s financial statement indicates a market cap of $102.35 Billion.
Moving averages such as Exponential Moving Average (10)(378.48), Simple Moving Average (10)( 384.28), Exponential Moving Average (20)(369.44) and Simple Moving Average (20)(365.23) are indicating a sell action.
Oscillators such as Stochastic RSI Fast (3, 3, 14, 14)(33.90), Williams Percent Range (14)(−66.64), Bear Power(−7.86) and Ultimate Oscillator (7, 14, 28)(47.11) are neutral.
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Recent Developments
Oil extraction from the ground is a fixed-cost operation. This has allowed BP’s profit margins to swell. According to several analysts, BP’s net income for 2021 will be $12.5 billion (£9.23 billion) versus $4 billion (£2.9 billion) in 2019. The company has also aggressively invested in a renewable energy portfolio since the world slowly shifting away from its reliance on fossil fuels. The company is on track to turn itself into a 50GW green energy powerhouse, with 40% of its oil & gas portfolio eliminated by 2030. This can power roughly 15 million homes or around 60% of all UK households.
The cost of installing and maintaining renewable energy technology is falling each year. This results in profits margin remaining relatively tight compared to oil. BP’s profits could suffer in the long-term even if revenues surge. BP’s short and medium-term margins are also at risk. Oil companies are at the mercy of fluctuating oil prices as they have a fixed operational cost. Oil prices can tumble before BP can make its aforementioned transition.
Major oil producers like Canada, Brazil and Norway can increase their spending which will, in turn, drown the market with excess oil. On the other hand, soaring investment in green technologies threatens to sink crude demand. BP is thus improving its green credentials to address the long-term threat. It has recently signed a deal with Oman to explore building multiple gigawatts of electricity from wind, solar and green hydrogen projects by 2030.
Should You Buy BP Shares?
Investors interested in BP should consider some major risks. While energy prices have soared, the fresh battle against COVID-19 variants has posed some problems. The economic recovery is also under threat from rocketing global inflation and China’s teetering real estate sector. Energy values could decrease if producers continue to hurriedly raise output. For instance, the number of US rigs in operation has risen in four of the last five weeks.
For long-term investors, BP isn’t quite worth it. The spectre of massive oversupply looms dominates BPs outlook for the next 10 years. Demand can decrease due to the global shift away from hydrocarbon energy towards renewable and green energies. In response to the climate change debate, asset managers around the world have been laying out plans to divest oil and gas holdings from their portfolios. All of this is bad news for BP.
With profits surging at the moment, BP has to complete its transition goals. It can employ its income from legacy oil and gas operations to grow the business for a greener future. Because of this and the relatively cheap price, Investors can go for BP shares at the moment. But they would have to keep an eye out n how well the company is achieving its green goals.
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