Crude prices have broken through the $69 a barrel level amid rising fears of a conflict between the US and Iran.
Any disruption to Iranian oil supplies would push prices even higher
In the UK, Brent crude hit new records of $69.37. US light sweet crude peaked at $69.45 before settling at $68.98.
Analysts have warned that prices could climb higher as geopolitical tensions increase worries that oil supplies will not be able to keep up with demand.
Prices are near US records of $70.85 hit in August 2005 as traders weighed the impact of Hurricane Katrina.
"It is pretty clear that we can break $70 without too much problem," Deborah White, analyst at SG CIB in Paris, said.
Oil prices have surged 13% so far this year, driven mainly by concerns about supplies from Opec members Iran, Nigeria and Iraq.
The current round of price surges has been sparked by speculation that the US may attack Iran over its plans to develop nuclear capabilities.
Both the US and key ally the UK have denied the claims, though that has done little to calm fears.
However, the European Union is considering what measures to take against Iran, including sanctions, should Iran continue with its nuclear policy.
Iran, the world's fourth largest oil producer, says it needs nuclear power to generate electricity, but the US and EU are concerned it wants to develop atomic weapons.
Although the US reiterated on Monday that it was a seeking a diplomatic solution to the row, some investors fear Washington may be running out of patience with Tehran.
"Concern about Iran never ceases to push prices," said Gerard Burg of National Australia Bank. "The mere mention of it sends prices higher."
Meanwhile, continued attacks on Nigerian oil supplies by rebels in the country and continuing conflict in Iraq have also helped to drive prices higher.