BP drags itself back into favour with investors

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Shares in the troubled oil giant rose 11.2p to 344.3p, taking the gains to nearly 14% since they closed at 303p on June 29.

But they are still down 47% since the explosion on the Deepwater Horizon drilling rig in the Gulf of Mexico on April 20 which killed 11 workers and caused the worst oil spill in US history.

Royal Bank of Scotland today said the loss in market value looked excessive and raised its rating on the stock from "hold" to "buy".

RBS set a price target for the oil giant from 455p — below its earlier target of 595p but well above the current price.

"We doubt that total direct and indirect costs of the spill to BP will be as large as currenty discounted in its share price," said RBS analysts David Cline and Barry MacCarthy in a note.

It raised hopes that BP should be able to meet the cost of the spill without a bailout from investors — with sovereign wealth funds in the Middle East among those interested in taking stakes.

A spokesman for BP insisted: "There are no current plans to issue new equity to anyone."

RBS said the first relief well will be completed next week, ahead of the August deadline set by BP, meaning the leaking Macondo well can be plugged.

"The completion of the first relief well will be a turning point in the Macondo well incident, which we believe may also be a turning point for BP's shares," said Cline and MacCarthy.