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.
So what are the problems plaguing the oil giant? For one, BP will have to pay an unspecified charge allegedly tens of millions of dollars following the death of 15 people at its refinery in Texas City. Also, BP's Russian business is currently suffering under higher taxes from the Russian authorities.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
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".
Nikkei 225 reaches record high: should you invest in Japan?
Japanese equities have soared to an all-time high. But do they still offer good value and should you invest?
By Katie Williams Published
The Co-op unveils new 7% regular saver- is it the best on the market?
The Co-operative Bank has launched a new best buy regular saver offering 7%. Is it the top deal and how does it work?
By Vaishali Varu Published