The establishment of a 20—billion—dollar fund for claims resulting from the massive BP oil spill in the Gulf of Mexico met with a positive response in London on Thursday, with BP shares rising sharply in early trading.

Energy Secretary Chris Huhne said the deal, announced after talks between US President Barack Obama and BP executives in Washington on Wednesday, underlined that BP was taking its “environmental responsibilities seriously.” George Osborne, the finance minister, said he was confident that BP as a company would be robust enough to survive the crisis.

“BP have set aside a pretty considerable sum of money, but they have these resources. This is a very important company, not just to the British economy, but to the American economy as well, and we want it to succeed and flourish for all our sakes,” Mr. Osborne said.

Up nine per cent on London stock market

BP shares, which have been halved in value since the Deepwater Horizon explosion on April 20, rose by more than nine per cent on the London stock market Thursday.

Analysts said investors clearly hoped that the deal would “cool the political heat” on BP and end the “war of words” over the spill.

Investors welcomed the fact that the impact the disaster would have on BP was “becoming clearer,” said Keith Bowman, an analyst at Hargreaves Lansdown stockbrokers. “The one thing investors hate is uncertainty,” he told the BBC.

Dividends payment to be suspended

In addition to the fund for the compensation of businesses affected by the ongoing oil spill, BP also agreed to suspend dividend payments this year.

“Notwithstanding BP’s strong financial and asset position, the current circumstances require the board to be prudent and it has therefore decided to cancel the previously declared first quarter dividend scheduled for payment on 21st June, and that no interim dividends will be declared in respect of the second and third quarters of 2010,” a BP statement detailed. It said cash flows from operations were expected to exceed 30 billion dollars this year at current prices, before taking into consideration costs related to the spill.

To increase available cash resources, BP intended to implement a “significant reduction in organic capital spending” and to increase the sale of “non—core assets” to approximately 10 billion dollars over the next 12 months.