Almost immediately prices surged with NYMEX Light, sweet crude for delivery in June up 17 cents to finish at US$41.55 a barrel, the highest settlement in the 21-year history of the contract on the New York Mercantile Exchange, after hitting US$41.85 in electronic trading before the official opening.

Brent North Sea crude oil for delivery in July rose five cents to US$37.91. Ezzedine Salim and seven others were killed by a massive car bomb in one of the most secure sectors of Baghdad, adding to fears of greater unrest in the Middle East, including the once secure kingdom of Saudi Arabia.

At the same time in Turkey, bombs exploded outside branches of British bank HSBC on Sunday, just before British Prime Minister Tony Blair was due in the country.

Meanwhile greater pressure has been put on OPEC to increase its production quotas after the Centre for Global Energy Studies (CGES) said in its monthly oil report that oil prices have hit record highs because of strong growth in demand and OPEC's failure to recognise that the world needs more of its oil.

OPEC maintains that its members are already producing two million barrels per day above quota and that there will be a global oil oversupply in the northern summer.

However greater than expected demand in Asia has created a gasoline shortage leading to soaring prices in many countries with some airlines adding petrol surcharges to their tickets.