The cost of insuring debt issued by BP PLC (BP.LN) fell again Friday after the company filled its leaking oil well in the Gulf of Mexico with cement, successfully completing the latest stage of its "static kill" operation.

The company's credit default swap spreads have tightened dramatically over the last six weeks alongside progress on the Macando oil well, a trend that is likely to continue as short-term uncertainties surrounding the ordeal are eroded.

"I think CDS will continue to tighten as the company remains a single-A credit over the longer term," said James Sparrow, a credit strategist at the Royal Bank of Scotland Group PLC, pointing to the company's assets and strong balance sheet.

At around 1120 GMT, the five-year credit default swap spread on BP was at 220 basis points, 14 basis points tighter from Thursday's close, meaning it now costs an average of $220,000 a year to insure $10 million of debt issued by the company, according to data-provider Markit.

BP's five-year CDS spread climbed to over 600 basis points in the middle and end of June on uncertainties surrounding the financial liabilities related to the leaking oil. Before news of the explosion at the Macando well came to a head, the CDS level on the company was around 43 basis points in early April and 51 basis points in early May, according to Barclays Capital.

The leak has proved to be the largest accidental oil spill in history, releasing about 4.9 million barrels of crude into the Gulf of Mexico , according to the U.S. government.

But analysts said the strong financial position of BP in the long term was never a major concern and that shutting the well will remove the short-term uncertainties that were responsible for the significant widening in its CDS spreads.

As the final phase of the process is expected to be done by mid-August, the company's CDS should continue to tighten.

"(BP) will continue to monitor the effectiveness of this [cementing] procedure, and is still targeting mid-August for the completion of the relief well, which will finally close the well for good," Sparrow at RBS said.

CDS are tradable, over-the-counter derivatives that function like a default insurance contract for corporate debt.

If a borrower defaults, the protection buyer is paid compensation by the protection seller. Swap buyers may be protecting investments they own or simply making bearish bets against companies.

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