Strong oil prices boosted Lord Browne's business

The British oil giant posted profits of $3.12bn (�1.95bn) in April, May and June, up from $2.19bn a year ago.

The figure represented a drop from BP's record profits of $3.73bn in the first three months of the year, but was at the top end of analyst forecasts.

Fears that the end of the Iraq war would see crude prices collapse as Iraqi exports flooded back onto the market failed to materialise.

Instead the lack of infrastructure and continued unrest in the country have helped maintain high prices.

Chief executive John Browne said that overall oil markets "continue to be characterised by relative tightness".

Dividend increase

As it unveiled its profits, BP also announced it was raising its quarterly dividend to 6.50 cents and that it may carry out further share buybacks.

He also set out plans to pump the "relatively minor sum" of $2bn into the firm's pension fund in the second half - sparking investor speculation that the move may hurt its buyback plans.

BP also reported that production, was down 5% in the quarter and 1% in the half year, owing to disposals and field production problems and shut-downs.

Earlier this year, the group unveiled a move to invest billions of dollars in a Russian joint venture with local partner TNK to spur production growth.

When that is completed later this year, it will transform BP from a 3 million-barrels-a-day company to one producing more than 4 million.

'Challenging'

Looking ahead, BP said it sees "continued price support" for crude oil in coming months as they come off their peak after the Iraq war.

It also warned its petrochemicals business will continue to operate in a "challenging environment" in the next three months.

BP's strong results follow a similar rise last week from Royal Dutch Shell, the world's second largest oil group.

Global leader Exxon Mobil is also expected to post higher profits.