US oil prices eased slightly on Tuesday, having earlier hit fresh 21-year highs of more than $50 a barrel.
Political unrest in Nigeria is worrying oil traders
Prices leapt to $50.47 a barrel in overnight trading as concern grew about disruption to supplies, but settled at $49.90, up 26 cents, in New York trade.
The price of Brent crude hit a fresh high in London, touching $46.80 before settling up 52 cents at $46.45.
An adviser to the Saudi royal family said he believed that current oil prices were "clearly way too high".
Saudi Arabia, the world's biggest oil exporter, had earlier attempted to reassure markets, saying it would raise production capacity by 1.5 million barrels to 11 million barrels a day.
"We believe the price of oil should be between $22 and $28," said Adel al Jubeir, an adviser to the Saudi Crown Prince.
Oil producers' group Opec said high prices threatened the world economy but it could do little to cool them.
Traders said unrest in Nigeria's oil producing region was the main reason for the latest price rises.
"Fifty dollar oil is just another step on the road to much higher crude prices," said Peter Schiff, president of asset management at Euro Pacific Capital.
Other factors holding prices high on Tuesday included the slow return of US output after Hurricane Ivan, low US stocks and fears about interruptions to Iraqi supply, traders said.
They also cited recent clashes between Saudi Arabian police and suspected Islamic militants in Riyadh as a destabilising influence on markets.
'Nothing we can do'
"The hits just keep coming," said John Kilduff, senior vice president for energy at Fimat USA, predicting prices would reach at least $51 a barrel in the next few days.
WHAT $50 A BARREL COULD MEAN FOR YOU
Higher prices for petrol and other fuel
Higher air fares
Higher costs for all companies, possibly leading to job losses
Higher retail prices as costs are passed on
Economic growth hit as consumer spending falls
The Opec president said the oil producers' cartel was worried about the potentially inflationary impact of soaring oil prices.
"At the moment, there's nothing we can do. Opec has spare capacity - however, whatever we do there is no sensitivity in the market," said Purnomo Yusgiantoro.
Opec raised output earlier this year in response to pressure from developed industrial nations but the impact was short-lived.
"If prices continue to go up there will be a danger to the global economy," he said. "I warn that high oil prices will result in the start of a recession."
Despite Opec's warning, Rodrigo Rato, who heads the International Monetary Fund, recently said the world economy was in its best shape for five years.
Robust growth, especially in China, has been a major factor in driving up prices, combined with supply bottlenecks.
On stock markets, shares in airlines, car makers and shipping firms suffered, though shares in oil firms rose.
Some industries are particularly vulnerable to rising oil prices.
Rising jet fuel costs could produce losses totalling as much as $4bn (£2.2bn) for airlines this year, the International Air Transport Association has warned.
It calculated that extra fuel costs could add as much as $10bn to the global airline industry's bills and wipe out any gains from improving passenger numbers.
The airline industry has remained fragile since 11 September 2001, with many of the US' and Europe's biggest carriers struggling financially.
The mounting unrest in Nigeria's Delta region is the latest of many factors troubling world oil markets, from instability in the Middle East, to hurricanes in the Caribbean and the pressure of stronger economic growth on global demand.
Shell and Agip have both evacuated non-essential workers from the south Nigerian Delta in recent days where the government is fighting insurgents.
"The problems of Nigeria have obviously got worse," said Robert Laughlin, a trader at GNI-Man Financial. "This is a major problem that we don't need because they produce sweet crude oil. There is not enough sweet crude oil."
This high quality, low sulphur crude oil is commonly used for processing into gasoline and is in high demand, particularly in the US and China.
Rebel fighters have threatened "all out war" in the country's Niger Delta region but oil firms remain confident that the situation is far from being that grave.
A Shell spokesman in Lagos said the company had received "threats like this in the past", and described the staff evacuations as "precautionary".