Can BP ever recover?

BP has failed to return to the highs preceding its infamous oil spill in 2010, when an uncapped well did untold damage to the surrounding environment and reputation of the company.

Following the Deepwater Horizon disaster in April 2010, BP’s drop in share price from 658p was swift and culminated in a 55% total decline before it bottomed out at 300p.

Since then the share price has tried to appropriate the 500p level twice and failed. With 520p representing the 61.8% retracement of the entire move, traders have felt that, given the uncertainty surrounding resulting penalties and potential costs, profit should be taken with any forays through the £5 mark.

The new Gulf of Mexico oil spill trial opens today in New Orleans, and is expected to last a month. BP will fight back against the potential penalties, but could face fines up to $18 billion. Under the Clean Water Act, BP could be fined $1100 for each barrel of oil that escaped into the Gulf, rising to $4300 a barrel if the company is found to be guilty of gross negligence. Government estimates are that 4.2 million barrels of oil were spilled during the 87 days, while BP says it was 2.45 million and that the government used untested methods to reach its figure.

The price action reflects the uncertainty felt over the last few weeks, having falling below the three-year trend line and finding a degree of bidding at 434p (38.2% retracement). We have a pivotal level here, and any close below 434p sets up a potential return to previous support around 416p.

With oil prices in general starting to pull back from the highs of this year, there is strong overall potential for a lower share price.

BPchart

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.