Heading into 2024, many investors were bullish on BP (LSE: BP) shares. Global GDP growth was anticipated, as was a stable oil price at $83 per barrel. There were strong BP dividend forecasts and a cheap valuation.

Moreover, the World Bank said in late 2023 that the oil price could head toward a record $150 if the conflict in the Middle East escalated. Unfortunately, this has happened over the last few weeks.

So, how much would I have made if I’d stuck £5k into the FTSE 100 oil stock at the start of the year? Let’s take a look.

I’d be down

The BP share price started the year at 466p. As I write, it’s at 385p, driven lower by falling oil prices.

That’s a drop of 17.4%, meaning my five grand investment would now be worth around £4,130. I’d have had some dividends too, but not enough to reach par.

Obviously that’s a disappointing return. And it shows how difficult it is to reliably forecast the direction of oil stocks. Right now, Brent crude is just above $72 a barrel.

The importance of China

On the demand side, China has long been vital for the oil industry. Approximately 60% of the total increase in global oil consumption over the past decade can be attributed to China.

However, the world’s second-largest economy is buying less oil. According to the latest International Energy Agency (IEA) report, oil consumption in China fell for the fourth straight month in July.

This has largely been down to slower economic activity, but there are other factors at play. The IEA says that “surging EV sales are reducing road fuel demand while the development of a vast national high-speed rail network is restricting growth in domestic air travel“.

It reports that oil demand outside of China is “tepid at best“. Indeed, it’s still 0.3% below 2019 levels.

How long is a piece of string?

But what about the long-term picture? Well, it depends who you ask. Back in June, the IEA warned that the world will have a “staggering” surplus of oil by 2030 if producers keep pumping it out. It sees oil demand for transportation use declining from 2026, with peak demand following in 2028.

On the other hand, ExxonMobil reckons demand will stay above 100m barrels per day till 2050 — roughly the same as today. It predicts global population growth will drive a 15% rise in total energy use by then.

According to BP, oil consumption is projected to fall to 75m barrels per day in 2050.

Should I buy BP stock?

Needless to say, nobody really knows for sure, and I think that’s a recipe for rising volatility in the BP share price in future. I already have quite a bit of that in my portfolio, and I’m not sure I want more.

Then again, BP stock appears dirt cheap, trading on a 12-month forward P/E ratio of about 6.5. That’s significantly cheaper than the FTSE 100 as a whole, and about half the forward P/E multiple of ExxonMobil.

The dividend yield looks attractive at 5.9%, but I have concerns about the payout. It was halved during the pandemic and is still well below its pre-Covid level. I’m going to give BP shares a miss.