BP shares set to slide over stranded assets, oil to hit $50 by 2021

The oil and gas major continues to see its share price trend lower as it prepares to dispose of ‘stranded assets’ amid weak demand due to Covid-19. Oil prices meanwhile could hit $40 in 2021, according to IHS Markit forecasts.

BP is set to end the week in positive territory, but the oil and gas major continues to see its share price trend lower as it prepares to sell large parts of its fossil fuel assets due to weak demand driving down energy prices amid the coronavirus pandemic.

However, the company has reportedly said that even if oil prices were to rebound sooner than expected, it would still dispose of its fossil fuel assets in order to free up cash to invest and prioritise investment in renewables.

The rationale behind the decision to sell its ‘stranded assets’ is based on the company’s choice to downgrade its oil price forecast to $55 a barrel, which renders $17.5 billion worth of its fossil fuel assets economically unviable.

The sale of billions of oil and gas assets is certainly in line with BP CEO Bernard Looney’s plans to reduce the company’s fossil fuel production by 40% by 2030 while dramatically ramping up its investment into renewables.

‘As we look at the outlook for BP over the next few years and as we see production declining by 40% it is clear we no longer need exploration to fund new growth,’ Looney told Reuters earlier this week.

‘We will not enter new countries to explore.’

Brent crude could hit $50 in 2021, says IHS Markit

Brent crude prices are expected to average at $42.35 a barrel this year, with oil forecast to finally break above the key resistance level of $50 in the second half of 2021, according to global information and research firm IHS Markit.

“As long as prices hold in the current range, demand concerns will likely help keep the [OPEC+] agreement on course,’ Diwan said.

‘When prices surpass $50/bbl, potentially lifting capital spending in the United States higher, that is when changes to the tenor of the discussion, and the divergence of interest could start to play out,’ he added.

At the time of publication, Brent crude is trading 56 cents lower at $44.53 a barrel, while the US West Texas Intermediate (WTI) is down 57 cents to $41.38

WTI eases off mid-week high

WTI enjoyed a strong first half of the week, but the past 48 hours have not seen a continuation of this bullish momentum, according to Chris Beauchamp, chief market analyst at IG.

‘Losses have been contained around $41.80 however, and a rebound from here would target $43.50 once more,’ he added. ‘A drop back below $41.50 further reinforces a more cautious outlook.’

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:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘BP Plc’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. 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.