Market Report: Surge in oil price pushes BP shares to a record high

British Petroleum helped to inspire blue chips as the booming crude oil price spurred its shares to the highest level in their history.

Only four years ago BP was down in the dumps with its shares bumping along at 182p. Yesterday they climbed 6.5p to 586p in busy trading.

Oils have been strong as crude prices have made steady progress. With Brent riding above $21 a barrel - the highest for nearly four years - and expected to go higher, the oil flame could prompt explosive share performances.

Shell gained 7p to 878p and Enterprise added 5p to 450p.

The excitement helped to produce an 8.8-point gain to 3,767.4 for the FT-SE 100 index, leaving it just 13.9 from its peak. The blue-chip index, measuring the 100 top shares, has lagged behind the second-liners since stretching to a record in February. But the supporting index, recording the behaviour of the next 250 shares, has with almost monotonous regularity ventured to new highs. It managed yet another with a 10-point gain to 4,387.1.

There was also just a hint that the elusive "feel-good" factor had filtered into the stock market. Building and related shares, if somewhat belatedly, enjoyed the latest shots in the mortgage war and an upbeat Confederation of British Industry report contributed to the more buoyant atmosphere.

The odd takeover story continued to do the rounds and many investors remained captivated by thoughts of share buy-backs and the payment of special dividends.

In a lively media sector Mirror Group led the field with a 12p gain to 232p in busy trading. There was the usual talk of a bid, with Carlton Communications the favourite to strike. But an investment meeting attended by David Montgomery, Mirror's chief executive, in New York was probably the main influence.

Banks firmed on the merger talks between Switzerland's two biggest banks, Credit Suisse and Union Bank.

Standard Chartered was a leading beneficiary, jumping 13p to 650p. The market alighted on the story that Switzerland's third banking power, Swiss Bank Corporation, would respond to any new alliance by hitting the takeover trail.

Standard, down to 292p a year ago, would be a clear candidate for SBC's attention; so would the Scottish banks, the Royal Bank of Scotland and the Bank of Scotland. Royal rose 13p to 504p and BoS 4p to 257.5p.

The feeling was that SBC would be particularly attracted to a UK bank, to allow it to build on its main London acquisition, the merchant bank SG Warburg.

Unilever, the Anglo-Dutch food and soaps giant, missed the fun. The shares fell 10p to 1,185p, just above their 12-month low. The BSE crisis has taken its toll but the market is more perturbed about the group's pedestrian trading outlook.

Water shares drifted lower as the Government sold many of its residual shareholdings, raising pounds 75m.

Warburg took on the shares, in Anglian, Hyder, Southern, Thames, United Utilities and Yorkshire, for on-sale to institutions. Interests in three water companies where takeover action is threatened have been retained. Biggest of the stakes was 3.5 million shares in Thames.

Mercury Asset Management improved 28.5p to 916p as Merrill Lynch made positive noises and MFI, the furniture group, continued to draw strength from Kleinwort Benson support, gaining a further 5p to 171p.

British Biotech had an uncomfortable session, retreating 58p to 2,380p, but Cortecs International rose 23p to 310p following what appeared to be a significant step forward in its testing of an orally delivered drug for osteoporosis; stockbroker Killik & Co expect a big marketing deal to follow. FirstBus fell 2p to 178p as James Capel placed 700,000 shares at 179p and London Scottish Bank lost 3.5p to 106p following a 650,000 placing by Barclays de Zoete Wedd at 106p.

Rexam, the paper group, put on 7p to 403p as Swiss takeover hopes lingered and Alvis, the defence group, rose 5p to 168p on persistent bid speculation.

FI, the software group, made a stunning debut; placed at 235p the shares shot to 300p in brisk trading. But another newcomer had a much more miserable time. Placed last week at 240p Avocet Mining fell a further 14p to 213p.

Queens Moat Houses firmed to 23.75p and Sentry Farming rose 44p to 218p on a profits jump and a planned acquisition. Signet, the jeweller, gained a further 2.5p to 33.5p on disposal hopes.