Oil giant BP Amoco yesterday reported a robust rise in its second-quarter earnings and gave a confident outlook for the oil industry on the back of rising prices.

The group, formed last year by the take-over of US group Amoco by BP, said efficiencies created by the merger had helped lift the figures despite severe difficulties in the oil market.

The group reported replacement cost profits of $1.23 billion (£911 million) in the second quarter of 1999, up from $1.08 billion (£800 million) at the same time last year.

Replacement cost profits exclude the effect of price changes on the group's oil stocks and are a standard oil industry system for reporting earnings.

For the half year, the group reported replacement cost profits of $1.9 billion, down from $2.36 billion in 1998.

The profits were in line with analysts' expectations and confirm recent signs of a recovery by the oil sector.

Oil prices had slumped over the last 18 months, falling as low as $10 a barrel, but have recently staged a recovery to stand at $20. BP Amoco attributed the recovery to actions by oil-producing countries to cut output, but said oil producers needed to maintain the controls if prices were to stay stable.

Chief executive Sir John Browne said the group had almost achieved its projected savings of $2 billion from its merger - and at a much earlier point than had been expected.

Profits in BP Amoco exploration and production business during the second quarter were boosted by the merger cost savings and improved oil prices.

Last month, the group announced new oil discoveries in the Gulf of Mexico, Angola and Azerbaijan.

Earnings fell in the refining and marketing business as a result of the severe decline in refining and the pressure on marketing margins.

Lower margins also squeezed the group's chemicals business, but earnings still improved due to higher volumes and a reduction in costs.

Shareholders will receive a quarterly dividend of 10 cents (6.25p) per share.