Warren Buffett once said that investors shouldn’t bet on which industry is going to have the biggest impact on society and the economy. Instead, their task is to identify the winning companies within an industry. And indeed, no industry has shaped the modern world more than oil & gas. Energy is what makes everything possible and we are literally addicted to crude oil.
Global crude oil consumption has been slowly, but steady rising. It is up from under 85 million barrels a day in 2008-2009, to an estimated 102 million a day in 2023. So it is fair to say that demand has been very consistent even amid the unpredictability of the 21st century so far. Yet, the price of the commodity itself has been quite volatile and so have been the stock prices of the companies producing it.
BP stock, for example, reached an all-time high of $79.77 in November, 2007. Sixteen years later now, it currently trades for less than half of that, at ~$36.50. Other oil majors, such as Chevron and Exxon Mobil, have been more successful at recouping their losses. And that’s precisely Buffett’s point about focusing on individual companies rather than on the industry as a whole.
The question is, can BP stock be expected to eventually regain what it lost between 2007 and 2020? It will surely take time, but the Elliott Wave chart below suggests that it can.
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The weekly chart of BP stock reveals that the 2007-2020 bear market took the shape of a simple A-B-C zigzag correction. Both waves A and C can be seen as five-wave impulse patterns, marked 1-2-3-4-5. Wave B is a contracting triangle pattern, labeled a-b-c-d-e. If this count is correct, the uptrend, which had been in progress prior to 2007, has already resumed. Despite today’s far-from-stellar Q3 earnings report, long-term targets above $80 per ADS remain plausible.
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