New York's main oil futures contract, light sweet crude for June delivery, hit the the historic peak in late afternoon European deals.

London's Brent North Sea crude also reached an all-time high of 120.25 dollars.

Both records beat high points set earlier in the day.

'People are piling back up on crude oil due to the weakness of the dollar and production issues in Nigeria,' said Mr Phil Flynn, analyst at Alaron Trading in Chicago. 'But it also looks like momentum play after Friday's positive reaction to the unemployment report.'

US government data released on Friday that showed US payrolls fell by 20,000 jobs in March, a quarter of the losses expected, helping to counter concerns that the weaker US economy could drag down oil demand.

The dollar fell broadly on Monday, however, as forex investors decided the world's biggest economy was still struggling. A Monday report from the Institute for Supply Management showed the US service sector grew unexpectedly in April.

Further support for oil came from Iran's announcement on Monday it would not consider any incentives offered by world powers that would constrain its right to nuclear technology.

The comments come just three days after major powers said they would make a new offer to convince the Islamic republic to halt its nuclear plans. The West believes Teheran wants to build nuclear weapons.

Iran's standoff with the West over its nuclear programme added geopolitical concerns and fundamental tightness last year that sent crude to new highs.

Crude has kept surging since then, extending a six-year rally that has more than quintupled prices, on a wave of investment by speculators seeking to hedge against inflation and the weak dollar.

US President George W. Bush, who has called upon oil cartel the Organisation of Petroleum Exporting Countries to increase output to help bring down prices, is expected to talk with officials from Saudi Arabia about the effects of high fuel prices on the US economy on his trip to the world's top exporter later this month.

Opec officials have rejected calls from consumer nations to ramp up production. They blame speculators for surging oil prices.

Additional supply worries came from Nigeria, where Royal Dutch Shell was forced to shut more of its production after militants on Saturday attacked a flowstation in the oil-rich Niger Delta.

Renewed clashes between Turkey and Kurdish rebels in northern Iraq also lent support to oil prices.

The Turkish army said on Saturday it killed more than 150 Kurdish PKK fighters in air strikes in northern Iraq last week, but the rebel group denied this and security forces in the region also expressed scepticism.

A poll of analysts forecast a weekly US government report on inventories due out on Wednesday will show a 1.8-million-barrel build in crude stocks, a 1.1-million-barrel increase in distillate inventories, and a 100,000-barrel fall in gasoline stocks. -- REUTERS, AFP