By Jonathan Davies

BP has reported a drop in profits in the three month to the end of June as oil prices continue to fall.

Underlying replacement cost profit fell from $3.63 billion to $1.31bn in the quarter.

Including the $7.5bn set aside for the 2010 Deepwater Horizon oil spill, BP posted a loss of more than $6bn.

Earlier this month, BP reached a settlement with the US Department of Justice and 400 local governments worth nearly $19bn.

Standing at around $52-53, oil prices are less than half their value a year a go. In addition to impacting on profits, the oil industry has witnessed huge reductions in investment over the past few months.

BP chief executive Bob Dudley said: "The external environment remains challenging, but BP moved quickly in response and we continue to do so.

"Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the group and we continue with capital discipline and divestments."

Mr Dudley added: "In the past few weeks, oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran. I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future."