BP shares suffer further blow amid dividend talks

Oil giant BP's shares endured another major sell-off today as the group's board weighed up a dividend cut in the wake of the Gulf of Mexico spill.

The shares were down 10% at one stage - wiping more than £7 billion off the stock value of the firm - as nervous investors headed for the exit.

The latest setback for BP came amid reports that two US senators had written to the firm demanding that it set aside 20 billion dollars (£13.5 billion) in a special account to pay for damages and clean-up costs.

BP declined to comment on the letter and said it would not make a statement on dividend payments following today's board meeting.

Meanwhile US President Barack Obama began a two-day visit to the Gulf Coast to view the damage from the massive slick and talk to those hit by the disaster.

BP came under heavy fire from the President last week for "nickel and diming" people who live near the spill while planning big dividends for investors. But today he added that it had paid 26,500 claims totalling 62 million US dollars (£42.3 million) to local businesses.

The company's latest update said the cost of the spill had reached 1.6 billion dollars (£1.1 billion) so far and its containment cap on the leaking well had collected around 127,000 barrels of oil.

But the firm's shares have now slumped by almost half since the crisis began two months ago when the Deepwater Horizon rig exploded and sank with the loss of 11 lives.

The latest tranche of dividend due in July is expected to be worth around £1.7 billion, and BP has confirmed its directors will today consider various options, including suspension.

If the firm does decide to suspend the dividend it would hit UK pension funds and investors in the US, who hold around 40% of the company's shares.

Mr Obama has summoned BP's chairman Carl-Henric Svanberg to the White House on Wednesday to explain what the company is doing to stop the flow of tens of thousands of barrels of oil and how it will compensate the thousands of people - including fishermen and oil workers - who have lost out as a result.

Meanwhile under-fire chief executive Tony Hayward faces a stormy grilling in Congress on Thursday which has the potential to reignite transatlantic tensions eased over the weekend in a call between Mr Obama and Prime Minister David Cameron.

During the call the President assured Mr Cameron he had "no interest in undermining BP's value" - and the two leaders agreed BP should continue to work intensively to ensure that "all sensible and reasonable steps are taken as rapidly as practicable to deal with the consequences of this catastrophe".