* FTSE 100 flat, FTSE 250 down 0.1%
* BP losses steam after Reuters' report
* Sirius Minerals sinks to record low
* Drop in banks countered by gains in consumer staples (Adds news items, analyst comment, updates to closing price)
By Yadarisa Shabong
Sept 17 (Reuters) - Britain's blue-chip index ended flat on Tuesday as losses in oil major BP, triggered by a report that Saudi Arabia's output could be back up quicker than expected, were countered by gains in so-called defensive sectors.
The FTSE 100 was marginally down at 0.01%. The FTSE 250 fell 0.1%, dragged lower by a collapse in the shares of fertiliser maker Sirius Minerals after the company cancelled the bond tender at the heart of a crucial project in northern England.
BP fell 1.4% as crude prices dropped after a top Saudi Arabian source told Reuters that production could be fully back on line within weeks following weekend attacks that halved the kingdom's output.
Meanwhile, heightened geopolitical worries and global slowdown concerns have sent investors flocking to so-called defensive sectors such as healthcare and tobacco stocks, ahead of a widely expected rate cut by the U.S. Federal Reserve on Wednesday.
AstraZeneca and British American Tobacco were among the biggest boosts on the main index, countering a drag by the financial sector.
"Given what is going on in relation to Brexit, traders are erring on the side of caution," CMC Markets analyst David Madden said as a Bank of England meeting is also due this week.
"(Traders) are taking the view that interest rates in the UK in the near term are probably more like to go down than they are up,"
Meanwhile, Britain's Supreme Court began hearing arguments about whether Prime Minister Boris Johnson's decision to suspend parliament in the run-up to Brexit was illegal.
On the mid-cap, Sirius Minerals plunged more than 50% to an all-time low after it scrapped a plan to raise $500 million in a bond sale as the government turned down a renewed request for backing.
But Woodford Patient Capital Trust rose 2.3%. The listed fund run by money manager Neil Woodford named BenevolentAI as the company that Link Fund Solutions, its authorised corporate director, last week cut its stake valuation.
Among other London-listed companies, French Connection slid 13% to its lowest level in more than one year after the fashion retailer delayed its sale process for the second time, with conclusion now expected by end of the financial year.
Staffline dropped 22% as the recruiter posted a loss in the first half and warned that Brexit had become a source of unprecedented uncertainty for its customers. (Reporting by Yadarisa Shabong in Bengaluru; editing by Patrick Graham, Subhranshu Sahu and Ed Osmond)