What’s Going on With the BHP Share Price?

BHP shale oil

What happened to the BHP share price?

As one of the most widely held stocks by Aussie investors, BHP Billiton [ASX:BHP] is always going to be a stock that gets a lot of attention. Especially when the share price falls over 60% in a little over 18 months. That would be a big enough fall for a small speculative mining stock, let along the biggest mining company in the world.

After hitting a low of $14.06 in January this year — a price it last traded back in 2004 — the BHP share price has been grinding back higher since. In the last week, though, the share price has shot up 18%. That’s a huge move for a company with a $60-plus billion market-cap.

Why did BHP do this?

As much as any stock, BHP rode the commodities boom that ran for much of the last decade. However, when the bubble burst, the price of iron ore fell through the floor. And over the last 18 months, the price of oil collapsed, also taking a big chunk out of the BHP share price.

The BHP share price has shot back up for two reasons. First, the price of iron ore has climbed nearly 50% off its recent lows. Of course, time will tell if this is just a bear market bounce, or part of a more sustained move higher.

And the second reason is the price of oil is also making something of a comeback. It, along with iron ore, has climbed close to 5% over the last week. Although scepticism still remains whether both can hold their recent gains.

What now for BHP?

After such a dramatic fall, not too many analysts were prepared to call the bottom of the BHP share price in January. Over the last couple of months, though, the share price has tracked the recovery of these two key commodities.

But structural concerns remain. Namely an oversupply — read glut — of both iron ore and oil on world markets. Any dramatic fall in either of these could quickly see the BHP share price moving lower again.

Matt Hibbard,
Money Morning

Matt Hibbard

Matt Hibbard

While many investors chase quick fire gains, Matt takes a different view. He is focused on two very clear goals. First: How to generate reliable and consistent income in a low-interest rate world. And second, how you can invest today to build wealth over the next 10–15 years.

Matt Hibbard

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