The BP (LSE:BP.) share price peaked at 562p in October 2023. The truth is, this was the best degree achieved since 2010, when the Deepwater Horizon catastrophe killed 11 individuals and resulted in 4.9m barrels of oil leaking into the Gulf of Mexico.

Nevertheless it hasn’t executed so effectively currently. It’s now round 415p.

May it attain £5 once more? Let’s have a look.

Analysing the figures

Given that almost all of BP’s revenue is generated from the sale of oil and oil-based merchandise, it comes as no shock to be taught that its monetary efficiency (and due to this fact its share price) is closely influenced by the price of Brent crude.

Because the chart under illustrates, there’s a powerful correlation between the corporate’s working money flows and the price of a barrel of oil. For the statistically minded, there’s been a 75% relationship between the 2 for the reason that first quarter of 2019.

In 2022, when the price of the black stuff was commonly over $100 a barrel, the group generated $40.9bn of money from its operations. No surprise its chief government on the time, described it as “literally a cash machine”.

Though not very tactful on condition that many individuals had been struggling to afford to warmth their houses, it did assist to focus on the potential of the enterprise when situations are in its favour.

Seeing into the longer term

So to reply the query about whether or not the oil large’s share price will break the 500p-barrier once more, we have to know the way Brent crude will carry out over the approaching months and years.

And that’s not possible to foretell — its price has ranged between $9 and $133 over the previous 5 years.

If geopolitical occasions, the climate, forex actions, environmental laws, and different commodity costs wasn’t sufficient, international financial progress will assist decide demand and the choices of OPEC+ will play a big half in affecting provide.

That’s why some educational research have discovered that assuming tomorrow’s oil price would be the identical as right this moment’s is simply as correct because the outcomes generated from many extra refined fashions.

My opinion

Nevertheless, on stability, I feel now might be a great time to contemplate investing in BP. Though I’ve no concept whether or not (or when) its share price will attain 500p.

However what I do know is that the drop in its share price has pushed its present yield to five.9%. This compares favourably to the FTSE 100 common of three.8%.

Nevertheless, it’s necessary to notice that dividends are by no means assured. Bear in mind, the corporate halved its payout in 2020 because of the pandemic and — in money phrases — it’s now 24% decrease than pre-Covid.

And regardless of international warming, it doesn’t seem as if we’ve reached peak demand for oil. Though there are numerous totally different predictions, Goldman Sachs, for instance, expects consumption to proceed to rise by till 2034.

However I don’t need to take a stake within the enterprise. I have already got publicity to the sector by my shareholding in Harbour Vitality. Having two probably unstable vitality shares in my portfolio can be too dangerous for my liking.