BP's share price soared almost ten percent on Thursday after the group suspended its shareholder dividend and agreed to create a 20-billion-dollar fund for costs from the Gulf of Mexico oil spill.
The group's shares rallied 9.64 percent to 369.50 pence on London's FTSE index of leading companies, which was 0.59 percent higher at 5,268.83 points.
After meeting US President Barack Obama, BP's board agreed on Wednesday to freeze payments to shareholders and announced plans to set aside a huge claims fund worth the equivalent of 16.2 billion euros.
"It's a relief rally -- the market was expecting some pretty stringent demands from the US government and so it could have been worse and the dividend suspension was not a surprise," said analyst Arifa Sheikh at fund managers GLC.
Investors welcomed the removal of uncertainty which has dogged BP ever since the Deepwater Horizon oil rig it leased sank on April 22.
"The bounce in BP is because some uncertainty has been removed," said David Morrison, analyst at finanial spread-betting group GFT.
"We now know that 20 billion dollars is being placed in escrow, that 7.8 billion dollars in dividend payments are being cancelled, that 10 billion dollars in assets will be sold and capital expenditure will be reduced by 4.0 billion dollars.
He added: "Most importantly, this is seen as mollifying the US administration. However, the stock will remain vulnerable until BP manages to block the spill."