Oil Stocks Could Top S&P 500 as Ratios Improve
Nikolay Stoykov, Managing Partner at Alaric Securities, on “In Development”, Bloomberg TV Bulgaria
Oil Stocks Defy Market Volatility as BP Posts Surprising Q2 Profit
Oil stocks showed unexpected resilience as British Petroleum (BP) reported a net profit for the second quarter of 2025. This performance stood out amid market volatility and contrasted sharply with the weaker results of rivals such as TotalEnergies, ExxonMobil, and Chevron.
The development was described as “somewhat surprising” by Nikolay Stoykov, Managing Partner at Alaric Securities, during the program “In Development”, hosted by Antonio Kostadinov, noting BP’s past missteps and troubled history.
Oil Sector Shows Renewed Investor Appeal
Stoykov pointed out that while BP’s performance is notable, the broader takeaway is the improving outlook for the oil sector as a whole.
Although current profits are lower than in past years, many companies are now stabilizing their costs. As a result, oil stocks are becoming increasingly attractive to investors, prompting analysts to revise their forecasts.
M&A Activity in Oil Stocks Could Rise
Discussing the possibility of large-scale mergers, including a hypothetical BP–Shell deal, Stoykov said such consolidation could become more likely as profits start to recover sustainably.
“I assume that acquisitions and mergers will increase over the next few years, once many of these companies start showing rising profit ratios,” he noted. “It’ll simply be much easier then to make a case for why a merger would be economically beneficial for both sides.”
At present, though, he believes the arguments for such deals remain unconvincing. Most companies are still focused on cost-cutting amid subdued earnings.
On crude prices, Stoykov remarked that the market has found a floor around $60 per barrel. Markets have shrugged off the recent OPEC+ decision to increase daily output by 500,000 barrels, suggesting that investors had already factored the move into their calculations.
Oil Stocks May Outperform the S&P 500
Looking ahead, Stoykov sees opportunities in the energy sector that are selective.
“There’s no dramatic reason to expect blowout results by year-end,” he said. “But opportunistically, I’d look to buy into the sector, not with heavy concentration, but with broader diversification.”
He emphasized that many oil stocks, including BP, Shell, and Saudi Aramco, feature highly attractive valuation ratios compared to market averages.“It’s hard to imagine these companies doubling in market cap, but I can see them potentially outperforming the S&P 500. The sector’s fundamentals are simply outstanding.”
Geopolitical Risks Unlikely to Disrupt Oil Markets
On a global scale, Stoykov dismissed concerns that tensions between the U.S. and India, stemming from India’s purchases of Russian oil, would lead to significant disruptions.
India is too important an economy for Washington to risk aggressive trade measures, he said. Policymakers plan to adopt a more balanced approach, favoring diplomatic solutions over real sanctions.
This material does not constitute investment advice.
Watch the full interview in the video.
Source: BloombergTV Bulgaria