Business News – Business Advice

London - Concern over BP's ability to tackle the spiralling costs of the oil spill in the Gulf of Mexico haunted the London stock market Friday where shares in the company fell to their lowest level since 1996.

As BP said its expenditure for containment of the massive spill had risen to 1.6 billion pounds (2.35 billion dollars), investors' unease was reflected in a sharp drop in BP's share price to around the sensitive 300-pence mark.

Despite assurances by the oil giant that Friday that measures to improve the capture of oil from the leaking well were on track, the battered stock fell by up to 9 per cent in London to levels not seen since August 1996.

Shares have been punished since the crisis began in April, wiping more than 60 billion pounds from the stock market value of the oil giant.

The growing risk linked to insuring BP's debt also worried markets, analysts said.

Financial research firm Markit estimated that the costs of insuring BP debts for five years now stood at 5.85 per cent, compared with 0.4 per cent before the crisis.

Meanwhile, analysts at investment bank Nomura warned that market worries over BP's short-term credit risk were "highly damaging" to the company.

They could limit BP's ability to secure attractive rates for its planned fundraising programme as well as selling off assets at reasonable prices.

"We see pressure growing on the company to assure sufficient funding to cap the well," Nomura said in a statement.

Nomura suggested that a 6.7 billion-pound funding injection from a major investor such as a Middle East wealth fund could shore up market doubts at a time when debt funding was dear and asset sales could take time.

Such as move would be similar to that made by Barclays bank at the height of the financial crisis in 2008, when it raised emergency capital from Abu Dhabi and Qatar to avoid having to go to the taxpayer.

BP insisted again Friday that it is in a strong financial position to tackle the spill and its long-term consequences.

The group has so far captured around 364,500 barrels of oil through its containment system, but it is estimated around 35,000 to 60,000 barrels a day are continuing to pour from the well, which ruptured after the Deepwater Horizon oil rig exploded on April 20.