Reports and rumors have intensified this year around the idea that British energy company BP has become a takeover target—especially by rival Shell—in what could be the biggest oil sector deal since the Exxon-Mobil merger in 1999.

Five years of contradictory strategic shifts, along with the sudden departure of the architect behind BP’s “green” plan, Bernard Looney, have left investors skeptical about the company’s direction—if not its very ability to convince markets and shareholders that it’s a stock worth holding.

The latest wave of speculation just days ago reignited talk of a potential takeover by Shell, the UK-based competitor. While Shell officially denied the rumors, it did not completely shut the door on making an offer at a later time, should material changes occur in current circumstances.

However, Shell—or any company eyeing a takeover of BP—would face a massive deal and numerous challenges, including BP’s higher debt levels compared to peers, and potential regulatory hurdles across several jurisdictions, including the UK.

How Did BP Become the Weakest Link?

Talk of a BP-Shell merger has long circulated in the market. For years, BP’s share performance has lagged behind its peers, and the company’s repeated strategic pivots—two in the last five years—have done little to restore investor confidence or convince markets of its ability to generate real value.

In 2020, then-CEO Bernard Looney launched a strategy to shift BP from an "international oil company" to an "integrated energy company," by reducing oil and gas production and ramping up investment in low-carbon energy. But the strategy—branded as “performing while transforming”—failed to win over investors, as returns from renewables remained weak and markets were unimpressed by the move away from the company’s most profitable activities (oil and gas) in favor of costly, less viable investments.

Then came 2022 and a global energy crisis, which drove major energy companies to refocus on delivering reliable and affordable oil and gas supplies. Looney began talking about solving the “energy trilemma”: cost, security, and sustainability. But in September 2023, Looney abruptly resigned following revelations of undisclosed personal relationships in the workplace.

After his departure, CFO Murray Auchincloss took over as interim leader before being formally appointed CEO in 2024.

Resetting the Course

In early 2025, Auchincloss announced a sweeping reset of BP’s strategy, refocusing on oil and gas and scaling back renewable investments.

The shift was believed to be partly driven by the activist hedge fund Elliott, which acquired nearly 5% of BP shares. Elliott is known for applying heavy pressure to enact rapid and fundamental changes at companies it invests in and has called on BP to reduce debt and prioritize shareholder returns.

But hopes that the new strategy would revive BP’s stock were quickly dashed. A negative turn in the market—triggered by trade wars and tariff disputes that pushed Brent crude prices down to near $60 in April and May—erased any short-term gains in the stock.

In Q1 2025, BP reported the weakest financial results among the major oil companies, and was forced to slash its share buyback program by $1 billion due to falling cash flows and rising net debt, further fueling speculation about a possible merger with Shell.

What’s Next?

Speculation resurfaced in the final week of June following a report in the Wall Street Journal that Shell had entered early-stage talks to acquire BP.

But a day later, Shell issued a statement confirming that it is not currently considering any offer to acquire BP, and that no approaches or discussions between the two parties have taken place.

Shell stated: “In response to recent speculation, Shell confirms it is not actively considering an offer to acquire BP, and has neither made any approach nor entered into any discussions with BP regarding such a matter.”

Under UK market rules, Shell’s declaration of non-intent now bars it from making another approach within the next six months, unless there is a material change in circumstances or a third party submits a formal bid.

Still, the door wasn’t fully closed. The statement also noted that Shell may reconsider the matter “should there be a material change in circumstances” or if a third party makes a formal offer to acquire BP.

Is There Truth Behind the Rumors?

Dan Coatsworth, investment analyst at AJ Bell, told Yahoo Finance: “The persistence of these rumors could suggest there’s some truth behind them—whether it’s Shell or another party eyeing the British oil and gas producer.”

However, any attempt to acquire BP would face major regulatory challenges in several markets. Any suitor would need to weigh the merger’s potential synergies against BP’s debt load, and possibly consider selling off assets to secure regulatory approvals.

The Energy Information Administration reported a buildup of 3.8 million barrels in US crude stocks last week to a total of 419.0 million barrels, while analysts expected a drop of 1.7 million barrels.

Gasoline stocks rose 4.2 million barrels to 232.1 million barrels, while distillate stocks fell 1.7 million barrels to 103.6 million barrels. 

US stock indices rose during Wednesday trading following the release of economic data that boosted expectations of a potential interest rate cut.

ADP data revealed that the US private sector lost 33,000 jobs last month, marking the first monthly decline since March 2023, while estimates had pointed to an increase of 100,000 jobs.

This data supported a rise in the probability of a Federal Reserve rate cut at the July meeting to 23.3%, up from 20% the previous day, according to the CME FedWatch Tool.

A Fed member stated yesterday that the US central bank would put a rate cut on the table for discussion and voting if there is clear evidence of a slowdown in labor market growth.

As for trading, the Dow Jones Industrial Average rose by 0.1% (or 24 points) to 44,518 points as of 16:26 GMT, while the broader S&P 500 index rose by 0.2% (or 15 points) to 6,213 points, and the Nasdaq Composite climbed 0.7% (or 148 points) to 20,350 points.

Nickel prices fell during Wednesday trading amid a rising US dollar against most major currencies, alongside trade concerns and pressure from US President Donald Trump on the Federal Reserve to cut interest rates and on other countries to reach a trade deal.

Traders moved cautiously, awaiting more clarity on these developments, while also anticipating the release of US employment data for June. The dollar rose slightly but remained near its recent lows.

Market participants are closely watching the European Central Bank’s annual conference in Sintra, Portugal, where Federal Reserve Chair Jerome Powell reiterated on Tuesday that the bank will take a “patient” approach regarding further rate cuts, but did not rule out a cut in this month’s meeting, stating the decision would depend entirely on incoming data.

This adds to the importance of the monthly non-farm payrolls report due on Thursday, just before the July 4 holiday. US job openings (JOLTS) data released Tuesday evening showed resilience in the labor market, helping the dollar rebound from its daily lows.

Another factor weighing on the US currency is the ongoing pressure from Trump on Fed Chair Jerome Powell to lower interest rates, raising questions about the central bank’s independence.

On Monday, Trump sent Powell a memo containing a list of key interest rates from global central banks, annotated with handwritten comments. He noted that the US interest rate should be between 0.5% (Japan) and 1.75% (Denmark), adding a remark on Powell’s performance: “As usual... way too late!”

Meanwhile, the dollar index rose by 0.3% to 97.09 as of 15:42 GMT, hitting a high at 97.1 and a low at 96.6.

As for trading, spot nickel prices fell 1.7% to $14,900 a ton as of 15:53 GMT.