UK traders have been piling into BP (LSE: BP.) shares. Final week, BP was essentially the most bought inventory on Hargreaves Lansdown’s platform each by the quantity and the worth of offers.

Is shopping for the oil inventory on the present share price a wise transfer? Let’s talk about.

The bull case

After I have a look at BP at this time, I can see causes to be bullish and causes to be bearish. Let’s begin with the bull case. One factor to love concerning the oil inventory is that there’s a juicy dividend yield on supply in the mean time. Presently, analysts are forecasting a payout of 32.5 cents per share for the 2025 monetary yr, which interprets to a yield of round 7%.

One other optimistic is the corporate’s shopping for again its personal shares. In its latest first-quarter outcomes, it introduced a buyback of $750m. Buybacks can increase earnings per share over time.

Moreover, the shares commerce at a reasonably cheap valuation. Presently, the forward-looking price-to-earnings (P/E) ratio right here is just about 10.

Then, there’s speak of an acquisition by rival Shell. Based on Bloomberg, Shell’s presently working with advisers to judge a possible deal. Nothing’s assured right here, but when it did make a bid for BP, its share price might rise.

So general, there are a number of causes to be bullish.

The bear case

On the identical time nonetheless, I additionally see a number of points to be involved about. Within the quick time period, the outlook for the oil business and the vitality firm doesn’t look good. Oil costs have tanked not too long ago and consequently BP’s revenues and income are down.

In Q1, BP’s gross sales and different working revenues fell 4% yr on yr to $46.91bn. In the meantime, underlying alternative price revenue (BP’s measure of earnings) per share was 8.75 cents versus 16.24 cents a yr earlier – a decline of 46%.

Taking a long-term view, the image doesn’t look significantly better because the rising concentrate on sustainability is negatively impacting demand for oil. In a single Worldwide Power Company (IEA) situation, oil demand barely will increase between now and 2030.

One problem on the demand facet is China. It accounted for roughly half of all world oil demand development over the previous twenty years. Nonetheless, the increase in electrical autos (EVs) within the nation has slowed demand development to a crawl, and is threatening to destroy all of it collectively.

It’s value noting right here that a number of years in the past, BP instructed traders that it had huge plans to develop into a renewable vitality firm. Nonetheless, it’s not too long ago ditched this plan and moved its focus again to fossil fuels.

Time will inform whether or not this was the best transfer. Nonetheless, proper now, it doesn’t appear to be an incredible technique.

Higher shares to purchase?

Weighing all this up, my view is that there are higher shares to think about shopping for at this time. To my thoughts, there’s an excessive amount of long-term uncertainty right here.

Positive, the dividend yield at this time seems attractive. Nonetheless, if the shares proceed to fall, general returns could possibly be disappointing.