The price of benchmark Brent North Sea crude oil for July delivery dipped 45 cents to 37.72 dollars in late morning trading in London, having surged by 1.66 dollars a day earlier.

New York's light sweet crude for delivery in July soared 1.79 dollars Monday to finish at 41.72 dollars a barrel, the highest settlement in the 21-year history of the contract.

In pre-opening electronic dealing, it slipped 27 cents to 41.45 dollars.

Traders are worried that Saudi Arabia has neither the capacity nor the support of other Opec members to increase production by enough to meet rampant demand.

"Demand is now growing one million bpd faster than non-Opec supply, and Opec's post-1998 under-investment is coming home to roost, amplifying the concentration of spare oil in Saudi Arabia, and the implications of further terrorism there," Deutsche Bank analysts told clients.

Saudi Arabia had proposed Friday that the Organization of Petroleum Exporting Countries (Opec) raise output by at least two million barrels per day (bpd).

Analysts note that the cartel's is already producing some two million barrels above its official 23.5 million bpd quota.

Opec ministers, at an informal meeting in Amsterdam on Saturday, postponed a decision until a formal gathering in Beirut on June 3.

Some members of the 11-country cartel appear less enthusiastic that Saudi Arabia about raising production substantially.

Iran backs a "limited increase" in Opec output to dampen soaring world prices, Oil Minister Bijan Namdar Zanganeh told Iranian state television.

Asked whether Iran would support Saudi proposals to boost the cartel's production ceiling by more than two million barrels per day (bpd), Zanganeh said: "The fact that Iran agrees with a limited increase in output does not mean it backs a hike beyond the usual limits."

He did not elaborate on what he meant by "the usual limits".

The minister warned that US pressure on Opec for a substantial output increase was counterproductive.

"US pressure on Opec to do something is really not a good thing at all. In fact it's very poorly regarded by member countries and will have no positive effect."

Even with extra oil from Opec, low gasoline inventories, refinery bottlenecks and fears about insurgency in Iraq and Saudi Arabia are likely to keep prices high, analysts said.