The media is now saying the oil price will climb up to $100 a barrel. But media frenzy can be a clear indication of a "market peak", says Lex in the FT. So does this mean BP investors should dump their stock?
Certainly not if yesterday's trading statement is anything to go by. The world's number two oil firm by market value said its second quarter production gained by 3.5% compared to the same time last year. Overall production was around 4.1m barrels of oil equivalent per day (boepd), compared to 3.97m boepd from April to June last year. Also the group is still making the most of high refining margins, as its complex refineries handle heavy crude better than its rivals, says Tom Bergin on Reuters.co.uk. What's more, the statement showed that BP had returned to growth in production outside of Russia.
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But BP's share price remains inexpensive, says Lex. Valuation models show that BP's share price discounts a long-term Brent Crude price of some $34 a barrel. This is obviously well below the current oil price predictions. And if these forecasts prove true, the oil sector could be "one of the few attractive sectors in the equity market this winter".
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