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Published On: Wed, Feb 6th, 2013

BP doubles revenue from contracts with US authorities, oil hits two week low

British Petroleum (BP Plc) made more than $2.5bn from contracts with the US Defense Department in the 12 months running up to September the 30th, up almost $1.5bn from the $1.04bn it made from the Pentagon in 2010. In November last year US authorities announced that there would be a temporary ban on the Pentagon forming new contracts with the British energy giant as part of their plea bargain in the case surrounding the 2010 oil spill on the east coast of the United States.

The oil spill saw 53,000 barrels of oil gush out of the wellhead per day, resulting in 210,000,000 gallons of oil contaminating 68,000sq miles of the Atlantic ocean along the east coast. The accident resulted in the loss of 11 lives and an almost complete halt to fishing industry along the coastline, with tourism also drastically affected. Until the company pleaded guilty to criminal charges last year it had continued to win new contracts with the government so long as it represented the best value to the US government which spends an estimated $25bn per year on oil.

Meanwhile, the price of Oil fell to a two week low today. West Texas Intermediate futures dropped by 1.7% after US supplies grew to 371.7 million, an increase of just over 2.6m. It is widely expected that the WTI will continue to fall until pipeline capacity is increased towards the end of 2013. Additionally, Brent oil for delivery in March has been making solid gains of late, which were reflected by a rise of 10 cents in London today, reaching $116.62 per barrel.

Crude production was up by 4,000 barrels a day, hitting 7 million a day by the end of January with Refineries averaging 15.8% below maximum capacity. This is pretty common for this time of year due to the upcoming shift in weather conditions, which increases demand for gas instead of oil which is used for heating around the world.

Another major factor on the prices today was the stricter sanctions being placed on Iran, which continues to defy world leaders with its nuclear programmes. This will ensure that Iran has very little way of exporting its oil, with only Japan, China and India currently trading with them openly. However, those trades are becoming somewhat problematic due to US sanctions which force the Asian economic powerhouses to trade with them in their own respective currencies or find themselves out in the cold when it comes to dealing with banks who operate in the United States — which most reliable financial institutions do.

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About the Author

- Gregory previously worked for a leading financial news publication and is now assistant news editor of financialtrading.com.

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