BP shares fall to year lows on US political pressure over oil spill

Shares in BP were under pressure again on Wednesday as investors worried that harsh words yesterday from US President Barack Obama may be a precursor for aggressive action to curb drilling in the Gulf of Mexico and to persuade BP to suspend dividend payments for at least one quarter.

Shares were down 24.0 or 6.09%, at 384.9p - having touched a low of 382p as US markets opened.

There was also a sharp pick-up in volumes as more than 85 million BP shares had changed hands by 2pm - nearly twice the three month daily average.

That added to concerns that even those institutional shareholders who saw their BP shares as a long-term holdings are beginning to worry the end-game may be more damaging than many have believed.

Yesterday, Obama said he would have sacked chief executive Tony Hayward if he worked for him.

David Buik at BGC Partners said: 'There is little doubt that President Obama acerbic and acrid comments towards BP have galvanised institutional shareholders to lighten up their holdings as well as enticing margined sellers to pit their wits against the vagaries of the market place.'

'I hope we get a full explanation as to what the President hoped to achieve by this very personalised and nasty attack, despite the need for BP to acknowledge their financial liabilities in the Gulf of Mexico, which it has never abrogated.'

Evgeny Solovyov, analyst at SG Securities, is advising investors to hang on before buying BP shares even at these lows.

He said: ‘Despite the depressed price, a better opportunity to buy the share is likely to arrive over the coming weeks and months.'

He believes uncertainty about the dividend is likely to weigh on the share price for the seven weeks until the second quarter results and a decision on the dividend is announced.

Hurricane concerns are likely to last through autumn and updates on additional Gulf of Mexico leaks have the potential to unnerve the market, Solovyov said.

'This is no longer a question of the strength of its balance sheet (which we think is strong enough) but of whether BP will be able to take the situation under sufficient control by the time it has to decide on the dividend in late July to come up with a story palatable for US politicians and public opinion,' he said.