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After a decline of 21.36% for the year, i BP (LSE: BP) price needs to kick back. Is US President Donald Trump the man to deliver it?
During the election, Trump made it clear that he would work hard at home on the first day of his presidency.
Many observers expect him to put aside cheap ambitions, ax subsidies for renewables, and drill, drill, drill for fossil fuels. Trump may be unpredictable, but I think we can put money on him doing just that. US voters love lower gas prices.
Could this FTSE 100 stock take off in 2025?
So why didn’t BP shares take off like a rocket yesterday? More FTSE 100 stocks with US exposure do just that.
Rental equipment specialist The Ashtead Groupwhich generates about 90% of its revenue from the US, jumped 5.56%, as investors awaited tax cuts and red tape. Defense expert BAE Systems increased by 4.92% when Trump wanted Europe to strengthen its forces.
In contrast, BP increased by only 0.36%, despite generating 29% of its revenue from countries. A rival A shell down 0.61%. Presumably, that’s because if Trump plays, plays, plays, it could trigger a new spike in prices.
On November 4 (with the US election apparently on a knife’s edge), the World Bank predicted a significant increase, as oil prices may drop below $60 a barrel in the next few years. Next year, it predicted that “Global oil supply is expected to exceed demand by an average of 1.2m barrels per day”. We’ve seen that twice before, in 1998 and in 2020.
The World Bank pinned the outbreak on China, rising electric vehicle (EV) sales, increasing use of liquefied natural gas-fueled trucks, and rising production within OPEC+ and abroad. Axios experts added: “This new reality may cap consumer energy prices as the country’s tensions escalate. It could also wreak havoc on an economy that has long supported oil production”.
This oil giant looks like a brilliant value
BP can break through to about $40 a barrel, so it’s not a killer. But profits, dividends and share buybacks may come under pressure.
Second guessing oil price movements is a mug’s game. For years, experts have been warning that we will run out of black stuff, and the US will get shale. Next, experts predict that the green revolution will eliminate the need for gasoline. That hasn’t happened yet either. However.
BP is also at a disadvantage to its US rivals. The new Labor government has just slapped a new tax on UK oil producers. Trump is willing to do the opposite, with plans to cut the corporate tax rate to 15% to boost US rivals such as Exxon Mobil, Chevron again ConocoPhillips.
I bought BP shares recently and have no intention of selling. I want exposure to energy prices for diversification purposes at least. Also, the stock is ridiculously cheap, trading at just 5.67 times earnings. And the next yield is a blockbuster 5.91%. I still think this will be a good long-term buy and hold proposition.
I am eager to buy more BP shares and will use other dips. Commodity stocks move in cycles. It is better to buy when they are low, but with a long-term view.
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