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The BP (LSE: BP) share price has had an okay run in 2025. Nothing special, it’s up a modest 12%, but not too shabby either, especially after adding the 5.5% trailing dividend yield.
Performance looked better a month ago, but the shares have sagged 7% since then, and as someone who holds the stock, I’ve got the uneasy feeling that there’s a lot more trouble to come in 2026. In fact, I’m worried BP is in for a proper battering.
It wouldn’t be the first time. The Deepwater Horizon tragedy in 2010 cast a pall over the business for years. Then the pandemic arrived and drove crude below $30 a barrel, hammering every oil stock. Prices rocketed in 2022 when Russia invaded Ukraine then trailed as Europe found replacement sources of energy, only for US tariffs to trigger further volatility.
Volatile FTSE 100 giant
My potted history shows how BP is at the mercy of events beyond its control. It’s also made mistakes, especially the humiliating hokey-cokey over whether to plunge into renewables or stick with old-school fossil fuels.
Today, I’m worrying about something BP can’t control: a potential oil glut. Crude has been slipping for six months amid softer demand and plentiful supply. Now it’s just suffered its worst week in two months after fresh warnings of oversupply in 2026, which has sent WTI crude oil below $60 a barrel. The International Energy Agency tried to calm nerves by taking a more positive view, but traders were too busy selling to notice. If this continues, 2026 could be brutal.
At The Motley Fool, we believe in buying shares with a long-term view, rather than trying to second-guess oil price movements. There are simply too many moving parts. However, we do like to take advantage of short-term dips to buy our favourite stocks at reduced prices, and bag a higher yield to boot. This can work particularly well in a cyclical sector like energy. But it requires patience and strong nerves, because struggling stocks rarely bounce back overnight.
Decent value, high dividend yield
In the past, oil oversupply would correct itself, by squeezing out marginal producers, while lower prices revive demand. Yet we can’t be 100% sure this still holds. The world also isn’t as beholden to oil as it used to be. Renewables get cheaper every year. That makes BP more vulnerable, especially as it’s doubled down on fossil fuels. There’s been a backlash against net zero lately, but that could reverse too.
BP doesn’t look wildly expensive with a forward price-to-earnings ratio of 14.6. Analysts reckon the shares will yield 5.4% across full-year 2025 and 5.73% in 2026.
It still carries has 26bn of debt, though management is whittling that down through disposals. Share buybacks keep rolling at $750m a quarter, which is reassuring, but I still think next year looks choppy. I’m not topping up my stake at today’s level, but I’ll be ready if the shares take a proper tumble. Long-term investors might consider buying BP shares today, but they should brace themselves for a lively 2026.
