Profits at the E&P unit soared by 59 per cent as it exploited a record average Brent crude price of $47.62 a barrel in the quarter, $3.77 a barrel higher than in the last three months of 2004.

"Prices appear to have been supported by high demand growth and limited spare production capacity," Lord Browne, the BP chief executive, said.

Volumes nudged 2.1 per cent higher to an average of 4.10 million barrels of oil a day, helped by increased volumes from the Russian TNK-BP joint venture and the first output from the Mad Dog project in the Gulf of Mexico.

The division’s results were also swollen by the proceeds of more than $1 billion from the sale of BP’s interests in Norway’s Ormen Lange gas field.

Lord Browne, in comments to reporters, held out the prospect of a continued boom in the unit's performance.

"Oil prices...look set to remain supported at above $40 per barrel for the rest of the year on the back of world oil consumption growth and limited spare production capacity,” he said.

In the refining and marketing division, quarterly profits rose by 54 per cent despite a $35 million charge to settle two lawsuits brought by US air quality officials. The financial impact of last month’s explosion at the Texas refinery was "limited", BP said.

Lord Browne said that refinery margins are continuing to be supported by "demand growth and concerns about US petrol supplies in the driving season".

Excluding one-off charges and gains, net profits rose by 41 per cent to $4.96 billion, ahead of the $4.3 billion expected by analysts.

"It appears to be genuine good news,” Brendan Wilders, the Oriel Securities analyst, said.

“E&P was better than we thought."

Barclays Stockbrokers said: “BP remains our preferred investment in the sector, given its better fundamental outlook, high margin production growth and enhanced value creation strategy."

BP shares stood 5.5p higher at 544.5p in afternoon trade after reaching 550p earlier.

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