Markets like the look of BP (BP/) results today with the shares gapping up to move even further away from the key 200-day moving average and maintain their recovery uptrend from Feb lows. The jump comes after news that Q1 underlying performance (excluding a host of one-offs and extraordinary charges) was much better than city expectations.

A handsome and surprising profit easily beat a consensus anticipated loss thanks to strong refining and aggressive resetting of the oil major’s huge cost base. This as the industry behemoth adjusts to a new challenging environment of lower oil prices,  something that OPEC leader Saudi Arabia looks to be resigning itself to given yesterday’s grand plans being based on $30/barrel; 33% below current prices, 12% below the average price for  Q1 and more than a little at odds with market hopes of a boost to prices from a market supply/demand rebalancing in the second of the year.

The question now is whether there is any further upside for the oil price and thus the share of the oil majors like BP and Royal Dutch Shell. We are of the view that the US shale/frackers have become the defacto swing producers, moving in and out as the price of a barrel moves up and down respectively. And it is said that $45 or thereabouts represents a viable price for the more nimble US producers. And that is where the oil price sits as we write. This could mean a ceiling for the oil price while OPEC and Russia pump at full pelt (even increasing, as Iran ramps up post sanctions) with the aim of maintaining market share in competition with the new kids on the block stateside. Saudi stubbornness is costing oil reliant government coffers dearly. Themselves included. The pain is resulting in factions within OPEC. How long can this situation persist?

Mike van Dulken & Augustin Eden, The Research A-Team, 26 April