BP shares set for bearish move as oil price collapses

Overnight the price of US crude fell into negative territory, driving down the share price of oil major BP, with it trading 4% lower on Tuesday.

The decline in oil prices is bad news for BP, which is set to unveil its first quarter (Q1) earnings next week, with the company left uncertain about how long commodity pricing will remain depressed or when demand will return.

In a trading update at the start of April, the oil major said that it continues to monitor the impact of the Covid-19 crisis on its global operations and said that while there has been no significant operational impact in Q1, things could change through Q2.

‘At BP we are mobilising in our own way across the BP world, taking action with three clear objectives: protecting our people; supporting the communities where we live and work; and strengthening our finances,’ BP CEO Bernard Looney said.

BP is trading at 288p as of 13:10 (GMT) on Tuesday.

BP: technical analysis

BP shares have resumed their downward move, at least for the time being, according to Chris Beauchamp, chief market analyst at IG.

Crucially, the bounce from the March lows ran out of momentum as it reached the gap down from the beginning of March.

This failure to close the gap is a bearish development, as is the creation of the lower high in early April below 380p. The retreat continues, and a move below 280p strengthens the hand of the sellers. Continued declines head to 220p, the lows from mid-March.

Oil prices collapse amid Covid-19 crisis

The US West Texas Intermediate (WTI) is trading at -$3.70 a barrel, prompting Brent crude to fall as much as 20% to slip below $20 a barrel on Tuesday – its lowest level since 2002.

The collapse of US crude was driven by weakening demand for oil as a result of the Covid-19 pandemic and global storage facilities reaching their limit.

In an interview with Bloomberg, Gerard Paulides CFO at Vopak, the world’s largest oil storage company, explained how all of its space for crude and refined products has run out due to the Covid-19 crisis.

‘The available capacity on the oil side is almost completely sold out for our terminals,’ Paulides said.

‘For Vopak, worldwide available capacity that is not in maintenance is almost all gone and from what I hear elsewhere in the world we’re not the only ones,’ he added.

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