Based on these oil price forecasts, BP’s share price could be difficult in 2025
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The US Energy Information Administration (EIA) recently released its November energy outlook report. Within it, the research team predicts where they believe the prices of various items will be in the coming year. Based on the latest oil figures, I think so BP (LSE:BP) share price could have a tough year ahead.
A strong rally is unlikely
EIA forecasts Brent crude oil at $73.02 a barrel in Q4 2025. This compares to the current price of $72.44. Put another way, if we fast forward a year, there may not be much difference in the price of oil. The EIA is sounding the alarm “at least two main sources of oil price uncertainty – the future course of the ongoing conflict in the Middle East and the willingness of OPEC+ members to stick to voluntary production cuts”.
Yes, I need to be careful when reading reports like this. There is no guarantee that the predictions will be correct. However, it is interesting to form an informed opinion by considering these thoughts.
Most investors are not active oil traders. However, changes in the price of oil can affect the price of stocks such as BP that are heavily involved in oil and other commodities.
How the stock is affected
Last year, BP’s share price fell by 19%. At the same time, oil fell by 12%. So there is a clear connection here. BP makes a good portion of its revenue from the production and sale of oil. So if the price goes down, BP’s income goes down as it can’t sell it for as much money as it could have a year ago.
If revenue falls, profits may also fall. This then affects the share price as investors try to find better opportunities elsewhere. Even though the dividend may be cut due to low profits, it has alarmed income investors.
In the nine months so far this year, profits came in at $2.34bn. This is a decrease from $14.86bn from the same period in 2023. So my concern here is that if we fast forward a year and the price of oil is basically the same, I would expect profits to be the same. If so, I don’t see a material rally in BP’s share price from here.
Other factors involved
It is true that stock can be mixed with different things. For example, a recent report showed how total debt rose to $24.26bn from $22.32bn. If the business is focused on reducing the amount of debt in the coming year, this can help to allocate prices for the meeting as investors are not too concerned about the amount of debt.
In addition, BP is involved in other products, not just oil. This includes natural gas, biofuels and renewable energy sources. So if one of these areas does well next year, it could help the stock.
Ultimately though, I feel that BP shares could be in for a tough year ahead, unless something changes to spark a rally in oil prices. So I won’t invest right now.
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