WASHINGTON/VENICE, Louisiana - British energy giant BP reached a tentative agreement with President Barack Obama on Wednesday to place about $20 billion in a special fund to pay damage claims from the Gulf of Mexico oil spill.

A source with knowledge of the agreement confirmed to Reuters the preliminary deal, which followed talks between Obama and top BP executives, their first since the start of the 58-day-old crisis.

Obama told Americans in a televised speech on Tuesday he would demand at Wednesday's White House meeting that BP set aside the money in an independently administered fund to pay for the claims, although he did not specify an amount. Lawmakers though had called for $20 billion to be set aside.

BP shares trading in New York rose more than 1 percent on news of the agreement after falling 5 percent in morning trade. Investors have been looking for clarity in the final bill that BP faces for the spill.

What remains unclear is how BP would pay for the fund, also known as an escrow account, and how its quarterly dividend might be affected.

Some U.S. lawmakers have called on the company to suspend payment of the dividend to ensure it has enough money to pay for damages, unnerving investors.

On recent visits to the U.S. Gulf coast, Obama has heard complaints from residents that the claims process is too long and complicated and that BP is paying out too little money.

BP executives, including Chairman Carl-Henric Svanberg, CEO Tony Hayward and BP U.S. boss Lamar McKay, filed into the West Wing of the White House just before 10 a.m. ET for talks with Obama, their first since the crisis began.

The talks were due to last for about two hours, a White House official said.

Kenneth Feinberg will administer the BP escrow fund, according to the source. Feinberg was the "pay czar", the official who oversaw compensation for executives at companies that received federal bailout funds.

Feinberg also oversaw a compensation fund for victims of the September 11, 2001, attacks on the United States.

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