BP share price could fall further as oil prices dip after Covid-19 returns in US

The oil and gas major closed 4% lower on Thursday after oil prices declined due to the resurgence of the coronavirus in the US, prompting investors to worry that a second wave will dry up demand.

BP closed 4% lower on Thursday after oil prices fell by as much as 3% as investors grow increasingly concerned that renewed lockdowns in the US due to a second wave of Covid-19 cases could once again dry up demand for fuel.

‘Gasoline stocks have lots to do with sheltering the oil price as they declined by amounts that were not expected and showed that road fuel demand is becoming robust again. Such news would normally lift the market, but under the current conditions they just help oil prices largely maintain their levels, instead of falling much by Covid-19-related negativity,’ Louise Dickson, Rystad Energy oil markets analyst, said in a note.

‘Covid-19 cases continue to increase in the US and traders wonder when they will see an end of this, when the trend will change. But as the US, Brazil and other countries continue to get hammered by Covid-19, demand is at stake,’ she added.

Brent crude slides as oil demand concerns grow

Brent crude is down 1.5% to $42.60 per barrel at the time of publication, while the US West Texas Intermediate (WTI) is 2.4% lower at $39.92 a barrel.

‘Given the volatility that still remains in the oil market it is curious that the oil price itself is so steadfast and tied down to about US$40/bbl,’ Dickson said. ‘Even after US inventories built by 5.7 million bbl (bringing stockpiles to yet another record high), traders barely flinched.’

‘In terms of supply, we still see continued compliance from OPEC+ signatories, who likely fulfilled production cut quotas by nearly 100% in June. We await the next JMMC meeting on July 15 for further clues on oil market management strategy. If it becomes more evident a second wave of Covid-19 will have a negative impact on oil demand, OPEC may step in to decide to keep deeper cuts into August, instead of increasing the group's production by a planned 2 million bpd,’ she added.

Brent gradually on the rise, yet gains slow

Brent crude has continued its ascent, with the price on the rise since Tuesday’s low. However, we are yet to break through the $43.71 level to continue the uptrend, with the price finding difficulty at the $43.48 mark, according to Josh Mahony, senior market analyst at IG.

‘A rise through that level should kick-start the rally once more, with a subsequent move towards the $43.71 likely,’ he added. ‘However, to the downside a move back through the likes of $42.90, and $42.50 would bring about a more bearish outlook for the short term.’

How to trade stocks with IG

Looking to trade BP and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  • Create an IG trading account or log in to your existing account
  • Enter ‘BP’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.