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A Roseate Spoonbill peers from brush stained by oil from the Deepwater Horizon oil spill on Cat Island, Louisiana June 9, 2010.LEE CELANO

U.S. shares of oil company BP PLC rebounded more than 10 per cent in early trade on Thursday, a day after plunging nearly 16 per cent on mounting fears about how the company will cope with the massive costs of the oil spill in the Gulf of Mexico.

The company's London shares were down 6.1 per cent to £3.67, hitting their lowest level since 1997 as they caught up to the losses in the United States that occurred after the U.K. markets closed on Wednesday.

Several analysts said the selloff in BP was not justified because the company still has ample cash reserves to cover the clean-up costs of the spill, but that the political pressures had created uncertainty in the markets.

"It's tough to make price predictions on the stock, but I think the downside risks are outweighed by the near-term upside potential," said Mike Breard, analyst with Hodges Capital Management in Dallas.

Much of the activity in BP appeared to be linked to dealers trading the spread between U.S. and London shares, he said.

BP's American depositary shares were up 8.8 per cent in early trade at $31.76 after hitting an early high at $32.35.

Jeff Rubin's Smaller World blog

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