The price of a barrel of oil has passed the $122 mark for the first time.
US light crude hit a fresh high of $122.73 in New York trading, while London's Brent crude has passed $120 for the first time, hitting $120.99.
Oil has been rising because of fears over possible supply disruptions in Nigeria and in northern Iraq and predictions of higher US demand.
Economists warn higher oil prices are continuing to drag on global economies already weakened by the credit crunch.
Oil has continued to hit record levels since it reached $100 a barrel for the first time in January 2008.
It has risen by 25% in the last four months and by about 400% in the last seven years.
Royal Dutch Shell's production from Nigeria is down by about 164,000 barrels a day after its pipelines suffered a series of attacks by militant groups.
Meanwhile in Northern Iraq, Turkish forces have renewed cross-border raids against Kurdish insurgents.
Optimism about the prospects for the US economy which may increase demand for oil, boosted the oil price in Asian trading.
"The bulls are in control of the market," said Victor Shum, energy analyst at Purvin & Gertz in Singapore.
"The economic report out of the US [on Monday] on the service sector seems to suggest the economic slowdown may not be as deep as initially thought," he said.
"The sentiment is that the oil pricing is likely going to stay quite strong, with a lot of volatility," Mr Shum said.
Analysts at Goldman Sachs predicted oil could reach between $150 to $200 over the next six months to two years in a report on Monday.
If oil prices stayed at current levels of $120 or rose further to $150, this would have "serious consequences" for the strength of the economy, economic forecasters said.
