In a tersely worded statement, the British oil giant said : "No definitive agreement has been reached. No assurance can be given that an agreement will be reached. Beyond this statement, no further comment will be made."
According to press reports, the deal could worth an estimated $20 billion to $25 billion, which would represent as much as a 20 percent premium over Amoco's closing price of $65.37 on Friday.
The Financial Times, meanwhile, said a deal could be announced this week. The negotiations were reported earlier on The Wall Street Journal's Internet site.
BP Amoco was formed late last year when London-based British Petroleum Co. acquired Amoco for $61.7 billion.
The BP Amoco deal was one of several mergers involving large oil companies. Exxon Corp. (XON) announced last year it will buy Mobil Corp. (MOB), creating the largest investor-owned oil company.
The stock of both companies has risen recently following the decision by OPEC last week to cut world oil supplies by 2.7 percent. Arco rose 1 5/16 to 65 3/8 Friday in New York trading, while BP Amoco rose 26 pence to 1037 in London.
BP Amoco said last month it is embarking on a post-merger savings plan and as many as 10,000 workers may lose their jobs.
The company saw a 37 percent drop in fourth-quarter profit, which it blamed on a protracted slump in oil prices. Crude oil prices have plunged from $18 a barrel this time last year to as low as $12. Arco's earnings dropped to $1.79 a share last year from $5.28 a share the year earlier.