New cap stops BP's Gulf oil well leaking for first time since April blowout

Residents of the Gulf of Mexico were daring to hope last night that they were witnessing the beginning of the end of the catastrophic oil spill at the crippled BP well after the company reported that first tests suggested that a new containment system put in place this week was working.

Pictures from underwater video cameras seemed to confirm the encouraging news that for the first time since the blowout on 20 April, when an explosion killed 11 men and wrecked the oil rig they were operating, there was no oil leaking into the marine environment.

The well was "shut in", the company said. This does not guarantee that the leaks were over permanently and officials continued to stress that only with the completion of the relief wells, hopefully sometime next month, will it be possible to describe the well as completely sealed in perpetuity.

"Great news but the disaster is not over... now focus on restoration, education reform and getting off oil," said Philippe Cousteau, the grandson of the legendary undersea explorer on a tweet broadcast by CNN.

"I think it is a positive sign," President Barack Obama said in the Rose Garden of the White House. "We are still in the testing phase." Indeed Doug Suttles, the chief operating officer of BP, said it may be necessary to open valves again depending on pressure testing that was not completed. "We are nowhere near making these decisions yet," he said when asked if the new cap could stop the flow for good.

"We have to be cautious right now. It's a great sight, but we are far from the finish line," Mr Suttles added. He said the testing that will happen over a 48-hour period would be crucial. But we could be very close to a point where people will say we have begun to turn a corner."

In New York trading, BP shares jumped 10 per cent in value upon news that the leak had at last been halted in the Gulf. US Coast Guard officials said that the success of the new containment system was important, particularly because in the event of a hurricane, BP would now be able to abandon the well without risking huge new volumes of oil gushing into the ocean.

"The intention of the capping stack was never to close in the well per se," Admiral Thad Allen of the US Coast Guard and the White House's man on the spot for the crisis told reporters in New Orleans. "The best reason to be able to shut in the well right now ... is it allows us to abandon the site if there is a hurricane. We can certainly consider shutting in the well – that is a possibility and of course we would like to do that."

The developments came just as proposals to ban BP from further offshore drilling in the US for seven years were being tabled on Capitol Hill. If enacted by the full Congress, the ban in the Gulf of Mexico alone would cut around 10 per cent of the company's production, some sources estimate. Legislation passed by a House of Representatives committee this week states that any company that has been liable for an accident killing more than 10 people in the preceding seven years or has been fined more than $10m (£6.5m), may not obtain offshore drilling leases or permits. The measure would need to be passed by both houses of Congress to become law. BP would be caught out on both counts. The group has not been proved criminally liable for the Deepwater Horizon disaster that killed 11 people and unleashed the worst oil spill in US history in April. But it has admitted culpability for the Texas City disaster in 2005, which left 15 dead, and was fined $20m for an Alaskan oil spill in 2007.

A ban on new drilling is potentially devastating for BP. Out of total production of 4 million barrels of oil equivalent per day (boed), some 1.2 million are in the US; 440,000 from the Gulf of Mexico. And BP's strategy includes plans for another 11 start-ups in the Gulf by 2015 and up to 160,000 boed from "new hubs" in the region by 2020.

How far the plans are curtailed would depend on whether restrictions apply to involvement in a consortium or only to companies taking the role of operator. Some experts questioned whether measures delaying oil production would be politically viable. But there is strong feeling against BP. "If the aim is to punish BP, then it would be possible to construct something that could force it to pull out of the region," one City analyst said yesterday. "If the legislation meant a delay in development activity, it would make it highly likely that it was in shareholders' best interests for the company to sell out."

BP refused to comment. The extra political pressure came as it was attempting to restart stress-testing of the damaged well last night. The test, and reports that the US energy group Apache is actively looking to raise $7bn to buy BP assets, helped BP shares on Wall Street rise 3 per cent last night.