BP’s relationship with the City suffered a fresh setback yesterday after profit downgrades by two highly rated brokers led to more than £4 billion being wiped off its market value.

The oil giant was accused by one of its biggest shareholders of fumbling its communications with the City after Merrill Lynch, BP’s house broker, slashed its fourth-quarter profits forecasts by $1.5 billion (£760 million), or 25 per cent.

Despite record global crude prices of around $100, Merrill cut its estimate from $5.9 billion to $4.4 billion, triggering the biggest one-day fall in BP’s share price since March 2003. At one point the stock fell by as much as 28½p, or 5 per cent, to 601½p.

The revised forecast was issued after BP disclosed overnight that rising oil stocks worldwide would lead to its tax bill soaring from 36 per cent to 43 per cent. As well as the increased tax burden, Merrill said that the revision was also related to rising costs and weaker margins from its oil-refining business.

Credit Suisse followed Merrill, cutting its profits target for the period by 26 per cent. The downgrades came only a month before BP publishes its latest quarterly results and prompted suggestions, firmly denied by the company, that it had been guiding brokers to lower forecasts.

A leading BP shareholder said: “This stuff about guidance and earnings is not satisfactory. BP should probably have made a statement to the market. This is a setback, but one I do think they will recover from.”

Shareholders described BP’s handling of the situation as “particularly unfortunate”, given that they welcomed moves by Tony Hayward, the new chief executive, to sharpen operational performance and improve the relationship with investors. Mr Hayward, who took over from Lord Browne of Madingley last May, has faced a baptism of fire, including sliding profits, the aftermath of the fire at BP’s Texas City refinery, in which 15 people died, and an Alaskan oil spill.

He was also criticised for mishandling the company’s communications with the market by revealing in a memo to staff , which was leaked later, that the company was braced for “dreadful” third-quarter results.

Mr Hayward is overseeing a jobs cull in which thousands of positions will be lost and up to four levels of management scrapped. Some observers estimate that up to 10,000 jobs could go.

Ironically, rising oil prices are partly responsible for BP’s problems. A BP spokesman said: “When prices are rising, people build up oil stocks, which is good business practice, but it also means there is a higher value of stocks with a higher tax liability.”

Shares in the company closed down 3.6 per cent at 610½p.

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