Market Report: BP surges on hopes of end to Alaskan oil embargo

BRITISH Petroleum surged 15.5p to a 406.5p peak, fuelled by hopes it would soon break through an Alaskan oil blockade.

There was evidence of keen US buying, and Goldman Sachs, the US investment house, is recommending the shares. Firm crude prices and today's Opec meeting also contributed to the bullish sentiment.

But it was the possible end, perhaps this week, of the Alaskan oil embargo that created the excitement.

A ban on exports has shackled BP's operations in the US state. It has been estimated that its repeal would be worth more than dollars 100m a year to the oil giant.

The Alaskan embargo dates back to 1973 when the US was loath to do anything that would increase its dependence on foreign oil.

BP is the biggest Alaskan producer, accounting for 220 million barrels a year.

Under the current regime, it has to sell its oil into the swamped Californian market or incur extra costs shipping to the US gulf or east coast.

Unlike the other leading Alaskan producers, such as Atlantic Richfield and Exxon, it does not have any Californian refining capacity which would help reduce costs.

The Alaskan ban is caught in US union legislation and BP is duty-bound to produce a case showing US tanker seamen would not suffer if, for example, it were allowed to sell directly to the oil-hungry Japanese market.

Other oils were strong, with Shell up 9p to 713p. But Enterprise Oil, as it duly produced its revised Lasmo offer, fell 9p to 390p. Lasmo, displaying indifference to the improved Enterprise shot, fell 4p to 143.5p, which compares with the market's 157p valuation of the bid.

But the display of the two oil heavyweights helped the FT-SE 100 index to produce another of its grand old Duke of York performances, rallying strongly after Monday's retreat.

The US sales and prices statistics indicated that inflation remained subdued, prompting the feeling that any further interest rate increase is unlikely to be considered until next month.

With bond markets looking stronger, government stocks threw off early falls of up to a point to end with gains of up to half a point.

A firm New York performance provided a further boost and Footsie closed 23.3 points higher at 3,039.6 with trading, swollen by programme trades, at a much more realistic level of more than 700 million shares.

Insurances were again in demand with Commercial Union regaining 7p to 515p. TransAtlantic, however, was the share in demand.

It rose 14p to 369p, making a 26p gain since last week's shareholding shuffle which lifted the interests of Union des Assurances de Paris and TransAtlantic's chairman, Donny Gordon. The pension White Paper is due next week.

Building shares were hit by the 14 per cent fall in construction orders in the three months to April. The setback was the main influence behind a 17.1-point fall to 3,578.7 by the supporting FT-SE 250 index.

Unigate jumped 22p to 384p as the feared acquisition and cash call failed to materialise with its results. Shoprite, the food discounter, crashed 27p to 51p as a sale and leaseback deal collapsed, reducing declared profits. The shares were 243p earlier this year.

ACT, the computer group, fell 33p to 136p as a 39 per cent profits increase was offset by a warning on reconstruction costs.

Investment presentations lifted Granada 6p to 529p and Ladbroke 3p to 164p.

Drugs moved ahead, encouraged by US influences. Zeneca gained 14p to 708p.

Imperial Chemical Industries missed the fun, falling 10p to 789p. Its sudden rush of overseas expansion - Pakistan and Taiwan - was put forward as one reason, but some suggested a badly executed sale order was responsible for the damage.

Navan Resources was also hit by a clumsy selling order, thought to be 100,000 shares, falling to 130p and closing at 143p, down 5p.

Coats Viyella, the textile group, put on 6p to 238p as Smith New Court said buy, suggesting the shares should go to 250p.

British Aerospace, resuming talks about a joint business jet venture with the Taiwanese, rose 8p to 467p on hopes of a Chilean defence contract.

Banks were mixed. Standard Chartered rose 6p to 272p in busy trading as the second leg of a tax-efficient bed and breakfast deal went through.

Blue chips were strong, but second-liners less confident. The FT- SE 100 index rose 23.3 points to 3,039.6, but the FT-SE 250 index lost 17.1 points to 3,578.7. Turnover was 709.6 million with 23,141 bargains. The account ends on Friday with settlement on 27 June.

In a reverse takeover Bell Court Fund Management, related to the stockbroker Hichens Harrison, is taking over Chartfield Investment Management, a private client investment group run by Mark Flawn Thomas. The Chartfield team will own 84 per cent of Bell Court, traded on the 535 market at 60p. More deals are likely, including an acquisition from the Waverley group.

Grand Central Investment, a London-quoted Far Eastern group with confectionery interests, is paying pounds 5.62m for 75 per cent of Meltis, the confectionery business. The deal has prompted GCI to give up any predatory designs on Armour Trust, the car accessories and sweets group. It is selling most of its Armour shares at 53p, raising pounds 3.36m towards the Meltis deal.