Obama cautious on BP's oil leak breakthrough

President Barack Obama today said BP's breakthrough in temporarily stopping the flow of oil into the Gulf of Mexico was "good news", but warned there was still lots to do.

Mr Obama said efforts would not stop until the leak - the worst in US history - was permanently stopped.

He warned that BP would "pay for the damage it has caused" and added caution over early hopes for the progress in capping the leak.

"The American people should take some heart that we're making progress," he said.

However, he said there was still "a big job to do".

"We won't be done until we know we have killed the well and have a permanent structure in place."

BP said last night that the leaking well had been sealed with a test cap that should stop crude oil spilling into the ocean for 48 hours.

However, the firm stressed that even if the test is successful it will not mean the flow of oil and gas has been stopped permanently.

It is hoped that should the flow of oil not be completely halted, the new cap will be able to contain around 80,000 barrels a day.

The news helped BP shares soar around 8% higher at one stage today, although wider stock market falls later pared the gains back.

The stock dipped below 300p at one stage last month - its lowest point since August 1996 - but has recovered to more than 400p amid signs that it is closer to tackling the crisis, which has so far cost more than 3.5 billion US dollars (£2.3 billion) in spillage and clean-up.

The disaster began when the Deepwater Horizon rig exploded on April 20, killing 11 workers.

BP is vital to the UK not only as an employer but also a major taxpayer and contributor to pensions. Of every £7 paid into pensions from dividends £1 comes directly from BP, and last year it paid £5.8 billion in taxes.

This year BP is not paying a dividend for the first time since the Second World War, although it insists it is financially strong enough to tackle the spill.

The group paid out about 165 million dollars (£110 million) in claims to 52,000 businesses so far, although the intense political pressure on the oil giant eased after it set aside a 20 billion dollar (£13.2 billion) compensation fund to meet the costs of the disaster in June.

A BP spokeswoman said: "Information gathered during the test will be reviewed with the relevant government agencies, including the federal science team, to determine next steps.

"The sealing cap system never before has been deployed at these depths or under these conditions, and its efficiency and ability to contain the oil and gas cannot be assured."

The test will see whether the steel casing of the cap is sufficiently strong for the well to be shut off in the long term.

Relief wells being drilled miles beneath the seabed will be the only means of permanently sealing and isolating the damaged well. The first of the wells is expected to be finished by the end of the month.

It is thought more than four million barrels of oil have so far flowed into the Gulf.