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BP Gains On Oil's Rally, While The Dividend Cut Woes Holds It Back

Summary

Shares of BP have rallied on account of rising oil prices.

But the company has been lagging behind its peers in recent weeks.

The ongoing concerns of a dividend cut keep holding back the stock.

In a recent article I talked about possible reasons for BP plc (NYSE:BP) to lag behind some of its peers including Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) and Total (NYSE:TOT). Even though oil companies rallied on the coattails of rising oil prices, oil companies including BP could still resume their descent. But not all is doom and gloom for this oil producer.

Oil and BP

The oil market has heated up during last month, pushing Brent past the $40 mark. But this recovery could change course because, as suggested by Barclays, the fundamentals haven't improved by much to maintain oil prices at these levels. And oil has benefited from several market developments that could change including the weakening of the U.S. dollar, falling U.S. output and possible oil production freeze by Saudi Arabia and Russia. Although I remain skeptical on any possible agreement to be reached next week in Doha, Qatar or that it could be honored by its members. And in any case, any deal that doesn't include Iran won't be enough to hold off oil prices from resuming their descent in the near term. For BP, the recovery of oil helped boost its stock, but not so much when comparing to its peers. BP's higher debt burden compared to some oil producers such as Royal Dutch Shell and Chevron (NYSE:CVX) and perhaps the negative impact from a possible Brexit may have taken their toll...


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