Shell and BP shares go live in September: is it time to think about buying?

September was a poor month for oil stocks. A shell (LSE: SHEL) is down almost 10%. Currently, BP (LSE: BP.) shares are down around 9%.

Is now the time for investors to consider buying these oil stocks? Let's talk.

Why did these stocks fall?

The reason these stocks fell last month was because oil prices were weak.

On September 10, oil fell to its lowest price for the year due to concerns about global economic conditions (a weak economy can mean less demand for oil).

Oil prices fell again at the end of the month after Saudi Arabia said it plans to increase its oil production and that it lowered its target by $100 per barrel (ie it expects lower prices).

As I write this, Brent crude oil is trading around $71 per barrel. That's about 22% below its 2024 high of $91.

This kind of oil price weakness is a big risk when it comes to these Footsie assets. Ultimately, their earnings, cash flow, and stock prices can be greatly affected by oil prices – which are notoriously volatile and unpredictable. The way I see it, oil stocks are inherently speculative because no one really knows what profits will look like in the future.

Are stocks cheap today?

Is there any value on offer today? It is possible. At first glance, the shares look cheap.

Currently, BP has a forward price-to-earnings (P/E) ratio of 7.6 while Shell trades at 7.8 times this year's expected earnings.

It is important to note, however, that in this industry P/E ratios are not the most reliable indicators of value. Considering that earnings can be highly volatile, earnings forecasts can vary from year to year and even be significantly off the mark at times.

Healthy dividends are available on offer

We can look at dividend yields, however. And right now, these are relatively attractive. Currently, BP sports a positive yield of 5.4% and Shell shares contribute 4%.

That yield from BP looks pretty sweet. If my investment goal was income, I would be interested in the dividend from the stock. Of course, dividends are not guaranteed and BP has lowered its payout in the past.

Additionally, dividends from these shares are in US dollars. If the pound continues to rise, it will translate into less income for UK investors.

Best stocks to buy for the long term?

However, at the end of the day the question of whether or not one will buy comes down to one's perception of finding oil.

If oil prices rise again, these stocks could do well in the medium term. If oil prices fall or remain stagnant, these stocks may underperform.

Personally, I have no idea where oil will go as I am not an energy expert (and even experts struggle to accurately predict oil prices). Goldman Sachs has a 2025 Brent crude oil price estimate of $76 per barrel, about 7% above current levels. Cition the other hand, it expects Brent crude prices to fall to $55 per barrel by the end of 2025 (23 percent lower). That's a big difference!

Given the uncertainty here, I think there are better (more predictable) stocks to buy for my investment portfolio.