The BP (LSE: BP) share price has had a troublesome 2024 and seemed too low-cost to me to withstand. So I purchased the FTSE 100 oil and gasoline big in September and November at what I believed was a discount valuation of lower than six occasions earnings.

I’m down 7.7% to this point however on condition that I goal to carry the inventory for years and ideally a long time, these are early days.

Lengthy-term BP traders may have had it more durable, with the shares down 18.93% over 12 months. The trailing yield of 5.95% will solely partially offset that loss. The plain wrongdoer is the oil price, with Brent crude falling 6.36% in 2024 to $71.04 a barrel.

Can this FTSE 100 inventory rally exhausting subsequent yr?

BP is extra than simply an oil producer, however its shares nonetheless correlate intently with power costs. We noticed that in the course of the 2022 power shock after they rocketed.

The place oil goes subsequent is anybody’s guess. There are such a lot of variables at play. US President-elect Donald Trump has pledged to ramp up shale manufacturing subsequent yr. By boosting provide, Trump might drive the price decrease. Though if he will get the US financial system motoring once more, this might drive up demand. However a commerce battle might drive it again down.

Trump has pledged to carry peace to Ukraine. If he manages that, Russian oil and gasoline might movement into Europe once more, driving down costs. However what if he doesn’t?

Then there’s Saudi Arabia. In September, there have been rumours that it could open the spigots to recuperate misplaced market share, driving costs even decrease. But final week, OPEC+ delayed the start of its manufacturing improve and slowed the tempo of the output hikes.

I’ve simply learn on Oilprices.com that pure gasoline costs are set to surge this winter “due to a combination of high demand, tight supply, and limited production increases”. And I haven’t even talked about the inexperienced transition.

Will the shift to renewables smash fossil gas costs? Or will falling oil and gasoline costs smash renewables? That’s a biggie for BP specifically, because it rows again on its ‘Beyond Petroleum’ technique, and returns to acquainted fossils territory.

It’s all an excessive amount of for my little mind. So what do the specialists say? On Friday (6 December), Morgan Stanley predicted Brent crude would common $70 a barrel within the second half of 2025. If right, that gained’t gentle a hearth below the BP share price.

But the 26 analysts who supply one-year share price forecasts are optimistic. They’ve set a median goal of 505.8p, up 34.25% from in the present day. That appears optimistic however I hope they’re proper. Of those, 11 name it a Sturdy Purchase, 4 title it a Purchase whereas 14 say Maintain. Just one says Promote.

I can justify my choice to buy BP on diversification grounds. I didn’t maintain any power shares. Plus its shares had been filth low-cost. And the dividend is excessive and rising. Subsequent yr it’s forecast to hit 6.3%, coated precisely twice by earnings.

Personally, I don’t know the place BP shares will go in 2025. No one does. However given the low valuation and excessive yield, I’m completely satisfied to go alongside for the journey.