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​​​​​BP share price: where now after $5 billion sale of petrochemical business?

BP sell their petrochemical business for $5 billion, but is it enough to bring the buyers back into play?

BP Source: Bloomberg

BP shares receive welcome boost

BP shares received a boost today, following the news of a deal to sell their petrochemical business to British chemicals company Ineos Ltd, for a handsome sum of $5 billion.

The deal provides a hefty chunk of liquidity at a time when the firm is facing obvious financial pressures given the recent slump in demand and subsequent weakness in crude oil.

Interestingly, this deal separates BP from the likes on Shell and Exxon Mobil, given the fact that both have been investing heavily in petrochemicals off the back of expectations that we will see substantial growth in demand this decade.

Nevertheless, with BP heavily indebted, the ability to raise these funds does provide a greater sense of security at a tough time. With the firm cutting 14% of their global workforce, there is a clear need to cut costs and raise funds where possible.

The deal sees Ineos provide a $400 million deposit, followed by a further $3.6 billion upon completion. Finally, the remaining $1 billion is to be paid by June 2021.

Where next for the BP share price?

From a technical perspective, BP shares have been drifting lower since hitting the £3.74 peak on 8 June. That pullback has taken the stock back into the key £3.02 support zone, which has been respected on four separate occasions since late May.

With the price turning higher from that region of support, there is a chance we could start to see price turn higher, yet it will also be dependent upon the price of oil.

BP daily chart Source: ProRealTime
BP daily chart Source: ProRealTime

Looking at the stock from a intraday perspective, the hourly chart shows a clear trend of lower highs over recent weeks. Today's rally has taken us back into the £3.16 resistance level, with the price starting to turn lower from here.

Thus, a break through that £3.16 resistance level would be an important first step in bringing about a more bullish outlook. Beyond that, the next major resistance level comes in the form of the £3.26 peak from 23 June. Until we start to see swing highs taken out, the recent downtrend remains in play.

BP hourly chart Source: ProRealTime
BP hourly chart Source: ProRealTime

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