The price of crude oil has nudged over the $41 a barrel mark into record territory following worries about global demand and gasoline supplies.
Producers insist they are struggling to keep the market calm
The benchmark US light crude rose to $41.17 a barrel, topping the record last set in October 1990 by 2 cents.
Meanwhile the oil cartel OPEC is mulling a proposal by Saudi Arabia to lift output by 1.5 million barrels a day to help reduce the problem.
US May holiday motorists taking to the road will account for 12% of fuel use.
Meanwhile a White House spokesman said the Bush administration was urging oil producers not to act in ways harmful to the US.
London Brent crude gained 54 cents at $38.49 a barrel.
In the post
Opec president Purnomo Yusgiantoro said that while member states were concerned about the current price levels, they have yet to agree on boosting output.
The Organisation of Petroleum Exporting Countries is scheduled to discuss changes to output on 3 June in Beirut. There also will be a forum in Amsterdam at the end of this month.
"I have sent letters to the members about the Saudi proposal and I haven't received any response yet," Mr Yusgiantoro told reporters.
He also explained that members states were already being allowed to produce well over their quotas and said that Opec's ability to affect prices was somewhat limited.
In fact, he explained, major oil producing countries are adding an extra 2 million barrels per day - 2.5% of worldwide demand - without having an effect on prices.
Yet the International Energy Agency (IEA) said on Wednesday that Opec members were not pumping their full quotas. It identified 2.5 million barrels a day of spare capacity among 10 Opec nations; roughly half of it is in Saudi Arabia.
The current strength in oil prices, which have risen by one-quarter this year alone, is partly to do with old-fashioned supply and demand.
There are supply concerns in the Middle East, where political instability is seen as a threat to oil output.
And markets such as the US, the world's biggest oil importer, are proving far more thirsty than analysts predicted, especially as the peak summer driving season gets into gear.
White House spokesman Scott McCellan said the US president "remains concerned" about rising petrol prices and that the US has been lobbying oil producers "not to act in a way that would harm our economy".
The IEA has raised its forecast for 2004 global oil demand growth to 1.95 million barrels per day, despite generally slow growth in developed economies.
Crucially, say analysts, the traditionally close relationship between demand and supply has partially broken down: for technical reasons, a number of the world's biggest producers, particularly outside Opec, have been unable to increase output significantly, leading to higher prices.
There are other, more subtle factors at play.
Nowhere near all of the apparently increased demand is connected with increased consumption.
The current surge is not just to do with consumption
Instead, it seems that major buyers - especially governments - are stocking up on oil, possibly to guard against any disruptions to supply.
The US strategic petroleum reserve has been a particularly active buyer, and governments such as China and India have followed suit.
At the same time, traders in the futures and options markets have anticipated a tighter market by bidding up forward prices.
Analysts are now divided between those who believe prices will rise as summer continues, and those who say there is no fundamental justification for prices to remain high for long.