Martijn Rats, head of European oil research at Morgan Stanley, said he saw a 70-80 percent chance that the two sides would agree a deal on civil and criminal charges surrounding the 2010 disaster sometime between BP's full year results on February 7, and the scheduled start of legal hearings in New Orleans on February 27.

BP sources have told Reuters that talks are ongoing with the Department of Justice about a possible settlement and that the London-based company's board has shifted to weekly meetings to discuss progress.

Chief Executive Bob Dudley has said BP would like to settle, although not at any price. When asked about the matter by reporters on Wednesday, he declined to make any comment, saying it was a sensitive time to be discussing it.

When contacted by Reuters, BP had no comment to make over the likelihood or size of a settlement of the charges surrounding the blast on the Deepwater Horizon and subsequent spill.

BP senses the US administration would like to settle the matter, not least because it is a US presidential election year, the sources said but any outcome is still seen as uncertain.

The estimated level of settlement in the Morgan Stanley note - the most detailed analysis Reuters has seen on the potential cost of the spill - is much higher than other analysts have predicted, and around double the amount BP has taken a provision for.

Senior company sources last year told Reuters that the company was prepared for a massive payout. One source predicted BP would offer "the mother of all settlements".

Another said the settlement would likely be the second-largest in US legal history, putting it between the US$206 billion the tobacco industry agreed to pay US states for treating smoking-related illnesses and the US$7.2 billion banks agreed to pay to settle litigation related to Enron's collapse.