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(AP)

BP shares drop as board meets

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Shares of BP fell in New York trading Monday as the company's board meets to decide whether to suspend its hefty dividend because of political pressure in the U.S.

BP lost $3.06, or 9 percent, to $30.91 in afternoon trading.

As BP's well continues to spew oil into the Gulf of Mexico, the White House announced that President Obama will order the oil company to establish a major victims' compensation fund. Obama and other U.S. politicians have previously urged BP to stop dividend payments to shareholders and instead steer the funds toward cleanup efforts.

Any BP board decision is not expected to be announced immediately, with BP executives due to meet Obama in Washington on Wednesday.

BP's stock price has been volatile over the past week. It dropped to a 14-year low on Wednesday, only to rebound on Thursday and Friday. The company has lost about $90 billion in value since the spill in the Gulf nearly two months ago.

At the current quarterly dividend rate of 84 cents per American depository share, the dividend rate is an extraordinarily high 10 percent.

Many analysts agree with the company that it has the ability to continue the dividend and pay for the cleanup of the spill, but they believe the company will defer it, put the funds into escrow or pay it in shares.

"I expect the dividend to be cut or suspended as a means of addressing some of the political pressure it's under," said Phil Weiss of Argus Research. "I think at this point the board recognizes that as well."

Jonathan Jackson, head of equities of Killik & Co. in London said the call by the Obama administration for a fund for victims of the spill appears to be an attempt to show that the government is doing something.

He said he expects BP to go along with the fund and to halt the dividend for now.

"Again, for political reasons, there is a good chance the payout will be suspended until the leak is stopped and there is more clarity over the cost of the cleanup," he said.

On Monday, BP said its costs for responding to the spill had risen to $1.6 billion. That includes new $25 million grants to Florida, Alabama and Mississippi, plus the first $60 million for a project to build barrier islands off the Louisiana coast. The estimate does not include future costs for scores of damage lawsuits already filed.

(Copyright 2010 by The Associated Press. All Rights Reserved.)