BP stops oil spewing into Gulf as well tests continue

HOUSTON/LONDON (Reuters) - BP Plc pressed forward with tests on its ruptured undersea well on Friday after plugging off the flow that has been spewing into the Gulf of Mexico for nearly three months in the worst offshore oil spill in U.S. history.

BP at last choked off the leak on Thursday, the first time it has managed to cap the flow since the blowout on April 20 which brought an economic and environmental catastrophe to the U.S. Gulf coast.

Investors greeted the news with cautious optimism since BP needs to complete 48 hours of tests on whether the well will remain intact after a new tight-sealing containment cap was installed on the mile-deep subsea wellhead three days earlier.

"It's relief all around to see that (undersea) camera with no oil coming out," said analyst Peter Hutton at NCB Securities in London. "But people recognize that they're not completely out of the woods."

BP's shares in London were up 4 percent at 417 pence at 1035 GMT (6:35 a.m. EDT) after the U.S. shares closed up 7.6 percent on Thursday.

The shares more than halved in value during the first two months of the crisis, but have bounced by more than 40 percent since touching a low in late June.

ASSET SALES

Investors also welcomed reports that BP was moving closer to sealing the first deal in its planned $10 billion of non-core divestments to help pay for clean-up costs.

The company and bankers were finalizing details of the sales of assets, including some U.S. interests to Apache Corp, said CNBC and the Financial Times.

The good news about halting the flow of oil into the Gulf was tempered by concern about BP's future in the United States.

The U.S. Senate Foreign Relations Committee said it had scheduled a hearing on July 29 into BP's actions in connection with last year's release of a Libyan convicted for the 1988 bombing of an airliner over Lockerbie.

POSITIVE SIGN

BP, which has failed several times in its efforts to end the leak, managed to stop the flow of oil as it conducted a test in which it closed valves and vents on the containment cap.

"I think that it is a positive sign," said U.S. President Barack Obama, whose public approval ratings fell as the oil spill crisis dragged on. He cautioned that "we're still in the testing phase."

The British energy giant is still moving to plug the leak permanently with the drilling of a new well to intersect the ruptured well -- which extends 2.5 miles under the seabed -- and seal it with mud and cement next month.

The test, which could last up to 48 hours, gauges pressure in the well to assess its condition. Officials said the test would show whether the cap can safely shut off the flow from the well if oil-capture vessels at the surface must disconnect, for example in the event of a hurricane.

"We're encouraged by this development, but this isn't over," said retired Coast Guard Admiral Thad Allen, the U.S. government's point man on the spill.

The Coast Guard said BP is likely to release the flow of oil again after the test is done -- siphoning it to ships on the ocean surface in an improved system able to handle up to 80,000 barrels a day until a relief well seals the well permanently.

That should be more than enough to capture the whole well output, as estimates put the spill rate at between 35,000 barrels (1.47 million gallons/5.56 million liters) and 60,000 barrels (2.5 million gallons/9.5 million liters) a day.

The Gulf spill has soiled hundreds of miles (km) of shoreline, shut down about a third of Gulf fisheries and hurt tourism and fishing in all five U.S. Gulf states. It has also created problems for Obama as the government works to respond to the crisis while area residents struggle financially.

The news that BP had at last stopped the leak gave fresh hope to battered coastal communities.

"I tell you what, we needed that," said Jimmy Thibodaux, a resident of the small southern Louisiana town of Cut Off.

(Additional reporting by Chris Baltimore in Houston and Alexandria Sage in Cut Off, Louisiana; Writing by Eric Onstad and Ed Stoddard; Editing by Will Dunham, Greg Mahlich)