BP share price has taken off: It could jump by 7.50% soon

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Written on Sep 1, 2023

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BP stock price made a bullish breakout on Friday.
Crude oil prices soared after Russia supported OPEC+ supply cuts.
The stock could jump by 7.50% to the resistance at 538p.

BP (LON: BP) share price has staged a strong comeback, helped by the relatively resilient oil and gas prices. The shares jumped to a high of 500p in London, the highest level since May 2nd. They have soared by more than 12% from the lowest point in June.

Crude oil prices are rising

BP, the giant energy company, was one of the best-performing stocks in London on Friday. This rally happened as the price of Brent crude oil surged by more than 1.09% to $87.70 while West Texas Intermediate (WTI) roared to $84.55.

These prices rose after Russia appeared to support more supply cuts by OPEC+. This means that the cartel will likely agree to slash production further in next week’s meeting.

Crude oil has held quite well in the past few weeks despite the rising worries of a global economic slowdown. The most recent concern is about the Chinese economy, which has been slowing in the past few months.

Therefore, if oil prices hold at the current levels, there is a likelihood that BP’s earnings will hold well this year. The most recent results showed that the company’s profit came in at $1.79 billion in the second quarter, down from the previous $9.2 billion. Its operating cash flow came in at $6.2 billion.

The company’s guidance showed that its production for the third quarter will be comparable to Q2. BP shares also jumped after the company will hike its wind power price in the US by 54%.

The biggest challenge for BP, Shell, and other European energy companies is how to bridge the valuation gap with their American rivals. BP trades at a trailing and forward PE multiples of 7 and 6.75 while ExxonMobil has 12.1 and 12.5, respectively. Chevron has PE ratios of over 11.

The daily chart shows that the BP stock price has made a strong bullish bounce back in the past few weeks. As the stock jumped, it crossed the important resistance level at 491.25p.

It has jumped above the 50-day moving average and invalidated the small double-top pattern that has been forming. Oscillators like the Relative Strength Index (RSI) and the MACD have also pointed upwards.

Therefore, the outlook for the BP share price is bullish, with the next level to watch being at 538.4p, the highest point on April 17th. This price is about 7.50% above the current level.