We recently published a list of 10 Oil Stocks with Biggest Upside Potential According to Analysts. In this article, we are going to take a look at where BP p.l.c. (NYSE:BP) stands against the other oil stocks with biggest upside potential.
In an interview with CNBC on November 26, Daan Struyven, Co-Head of Global Commodities Research at Goldman Sachs, discussed the current state of the oil market and the potential impact of a ceasefire in the Middle East on oil prices.
Struyven noted that while the geopolitical risk premium in oil prices was fairly modest, he thinks that the market is focused on risks with a clear path to lower production. The market has not yet fully priced into this possibility, and the current price of oil is too low compared to inventory fundamentals.
Struyven pointed out that global oil inventories have edged down this year, and the market has been in a deficit of around 0.5% of global markets. He thinks that many oil investors are pricing in a large surplus for 2025, which Struyven believes is not done yet and he sees significant upside risk to prices in the short term, potentially coming from lower production from Iran.
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Struyven noted that while the Trump administration’s goals are achievable, they are largely driven by technological advancements and LNG export plans that are already underway despite any policy change. He also agreed that the big oil companies are not eager to spend more money on production on current oil prices.
Struyven also highlighted OPEC’s influence on the market, emphasizing Saudi Arabia’s preference for higher oil prices. He suggested that OPEC would likely defend a price floor of around $70 per barrel but would not hesitate to increase supply if prices climb above $80. This aligns with his expectation that oil prices will remain within a range of $70 to $85 per barrel.
Finally, Struyven attributed the changes in the oil market to the success of US shale production, which has accounted for 100% of global oil production growth over the past decade. This has put downward pressure on long-term prices, making it less likely for oil prices to spike above $100 as they did in the past.
The oil market is influenced by a range of factors, including geopolitical risks, production levels, and OPEC’s strategies. The potential for a ceasefire in the Middle East, for example, could impact prices, but the geopolitical risk premium is still relatively modest. Despite this, oil prices remain lower than expected based on inventory fundamentals. While these dynamics shape the near-term outlook, long-term oil price increases above $100 are less likely due to the impact of US shale production, which has accounted for all global oil production growth over the past decade.
Vytautas Kielaitis / Shutterstock.com
Our Methodology
For this article, we sifted through Energy ETFs and online rankings to form an initial list of 35 Oil stocks. We then sourced the analysts’ average price targets and picked the 10 stocks that had the highest upside potential, as of November 29. We also included their hedge fund sentiment, which was taken from Insider Monkey’s Hedge Fund database of 900 elite hedge funds as of Q3 of 2024. The list is sorted in ascending order of analysts’ average upside potential.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
BP p.l.c. (NYSE:BP)
Upside Potential: 32.62%
Number of Hedge Fund Holders: 36
BP p.l.c. (NYSE:BP) is a British multinational vertically integrated oil and gas company headquartered in London. The company operates in all areas of the oil and gas industry, including exploration and extraction, refining, distribution, marketing, power generation, and trading. The company operates in over 80 countries worldwide.
BP p.l.c. (NYSE:BP) is poised for significant growth in the Azerbaijani sector of the Caspian Sea. In the third quarter, the company agreed to jointly explore and potentially develop two promising blocks, including the Karabagh oil field and the Ashrafi-Dan Ulduzu-Aypara (ADUA) area with the State Oil Company of Azerbaijan Republic (SOCAR).
These blocks offer substantial potential for new discoveries and development. By partnering with SOCAR, BP p.l.c. (NYSE:BP) is well-positioned to capitalize on the vast hydrocarbon resources in the region, which is expected to drive significant growth and production increases.
During the third quarter of 2024, BP p.l.c. (NYSE:BP) reported $206 million in profits attributable to shareholders and generated $6.8 billion in operating cash flow. The company also announced a new share buyback program, following the completion of a $1.75 billion buyback program in the second quarter of 2024.
Overall, BP ranks 4th on our list of oil stocks with biggest upside potential according to analysts. While we acknowledge the potential of BP to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.