New York light sweet crude reached an unprecedented peak of $142.26 a barrel, and in London, Brent North Sea crude hit an all-time high of $142.13, a day after prices crossed $140 for the first time after OPEC President Chakib Khelil predicted prices to reach $170 this summer.
"I forecast prices probably between $150 and $170 during this summer," Khelil, who is also Algeria's energy minister, told France 24 TV on Thursday. "That will perhaps ease toward the end of the year."
His remarks were blamed for the upsurge, as were Libya's threats by its most senior oil official, Shokri Ghanem, to cut production in response to U.S. threats against oil producers and because the market is well-supplied.
The U.S. House of Representatives in May passed a bill that would allow the Justice Department to sue members of the Organization of Petroleum Exporting Countries for limiting supplies and setting prices. The bill still needs to be endorsed by the Senate and the U.S. administration of George W. Bush said it would veto the draft law.
Libya's production in May amounted to 1.71 million barrels per day (bpd) out of OPEC's total of 32.12 million bpd.
Although most analysts were skeptical that Libya would follow through with a reduction due to the rising prices in crude, the official's remarks were still regarded as one of the reasons for the rise in demand on Thursday and Friday.
OPEC, which supplies 40 percent of the world's oil, has been coming under growing pressure from Western consuming countries to increase its output, blaming it for insufficient production for the rise in prices.
The cartel, however, insists the market is well-supplied and mostly blames speculators, the declining dollar and tensions in oil-producing countries, such as Iran, Iraq and Nigeria.
The declining value of the dollar against other leading currencies since 2005 has led foreign investors to look for opportunities in commodities traded in the U.S. currency, making crude cheaper to buy and pushing up the demand for oil.
OPEC accuses some traders of profiting enormously by betting on the trend of prices, forcing them up. But traders say they are hedging their investments against future market developments to reduce risk.
The U.S. House has asked the American regulator, the Commodity Futures Trading Commission, to use its authority and emergency powers to "curb immediately" the role of unjustified speculation in energy future markets, while the International Monetary Fund is investigating the role of traders in the price hikes.
That is not to say there has not been a rise in demand in the past three years, where it has gone up by 3 million bpd and is predicted to rise by 32 million bpd in the next 20 years, thanks to rapidly-growing economies such as China and India, which are expected to account for 40 percent of the growth in oil demand by 2030.
The United States continues to be the world's largest oil consumer, but the price hikes have strained economies worldwide and sparked protests across the globe, especially in developing countries feeling the worst crunch.
The debate over who is to blame for the continued increase that has caused dangerous levels of inflation, which analysts warn could unleash civil unrest, apparently led Saudi King Abdullah bin Abdul Aziz to increase output by 200,000 barrels per day.
At a meeting of 23 producer and consumer nations and 22 oil companies in Jeddah last weekend, the monarch of the world's largest oil reserves said his country would start pumping 9.65 million barrels a day as of July to help ease the situation.
King Abdullah also pledged a generous $1 billion donation to an OPEC fund for developing countries and $500 million in soft loans for poor countries to finance energy and development projects.
While the announcement to increase output was widely welcomed, it has so far done little to ease the situation, indicating what some Arab talking heads say is a strong sign that it was not a question of sufficient supplies, but "greed of Western corporations and consumers" being responsible for the uphill trend in prices, which some fear could reach $200 a barrel this year.
Analysts say the lack of impact the increase in Saudi production has had on reducing market prices would prevent other producing countries from raising their own outputs.
They predict the rates would continue to rise until the U.S. dollar value stabilizes and violence in producing countries comes to an end. That could be difficult, especially when the effect of rising oil prices could dangerously turn into another reason for violence and unrest.