BP share price could be about to form a death cross pattern
BP (LON: BP) share price has come under intense pressure in the past few weeks as crude oil and natural gas prices tumbled. The stock plunged to a low of 450p, the lowest level since December 2022. It has plunged by more than 18% from the highest point this year, meaning it is nearing a bear market.
Crude oil and natural gas prices slumpCopy link to section
BP and other energy stocks are struggling as concerns about the oil and natural gas prices continue. The closely-watched Vanguard Energy Fund (VDE) has plunged by almost 50% from its highest level in 2022 and there are concerns it could drop further.
BP and other European companies like Shell and TotalEnergies have also underperformed their American counterparts like Occidental, Chevron, and ExxobMobil among others. Analysts cite their extreme focus on climate change and clean energy as the reason.
The biggest concern for the BP share price is that oil and gas prices are plunging. Natural gas price has plunged by over 74% from its highest level in 2022 and is now sitting at the lowest level since 2021. Similarly, Brent has dropped to $70 per barrel, much lower than last year’s high of $138. Analysts believe that oil could fall to about $60 in the coming weeks.
BP makes money when oil and gas prices are rising as evidenced by the strong performance seen in 2022. In a period when the opposite is happening, the company needs to compensate lower prices with volume. Unfortunately, there are signs that volume growth is not happening as fast as it did last year.
BP is also set to slow its capital return program to shareholders. In its most recent results, the company said that it expects to return about $4 billion per year, which was at the lower side of the $14 billion and $18 billion capital expenditure range.
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BP share price technical forecastCopy link to section
The daily chart shows that the BP stock price has been in a strong bearish trend in the past few weeks. It has moved below the important support level at 491p, the highest point on November 30th. The shares retreated below the 200-day and 50-day exponential moving averages (EMA). It is also about to form a death cross pattern, which is usually a bearish sign.
Therefore, there is a likelihood that the stock will continue falling as sellers target the next psychological level of 400p. This makes it highly risky to buy BP stock. A move above the key resistance level at 491p will signal that there are more buyers left in the market.