A top executive at Bank of America® Merrill Lynch told the bank’s traders not to enter into oil trades with oil giant BP after June 2011, Reuters reported, citing an anonymous source familiar with the oil markets.

Although a reason for the instruction was not provided, there is speculation that it may be a method of protection against the risk that BP, responsible for a massive oil spill in the Gulf of Mexico, might be unable to meet contractual responsibilities in the future.

It was recently reported that BP agreed to establish a $20 billion escrow fund to pay for the damage in the Gulf of Mexico. Although this agreement is still in negotiation, the economic liabilities of BP could understandably make Bank of America® a bit nervous. Already in the public eye for ongoing financial troubles related to mortgage-lending arm, Bank of America® has no room to take a gamble on longer-duration trades with a company like BP.

BP Stocks, Credit in Trouble

As a result of the accident in the gulf, BP’s shares on the New York Stock Exchange have fallen nearly 50%. BP’s credit rating was knocked down six levels on Tuesday by Fitch Ratings, which used the costs of the spill as its reasoning for the markdown.

Although Bank of America® is not one of BP’s larger oil trading partners, the loss of Bank of America®’s trading would be another blow to an oil trading division at BP that has seen several employees quit. It would also be another symbolic blow to the reputation of the powerful oil company.

For more information from Reuters on the relationship between BP and Bank of America®, click here.

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