New York: World oil prices smashed to record highs as concerns over hot global demand swamped news of a peace deal in Iraq with Muslim Shiite militia leader Moqtada Sadr.

New York's benchmark contract, light sweet crude for September delivery, surged 52 cents to a record settlement of $ 47.37 yesterday (Aug 18, 2004). In electronic trade after the market closed, it shot to an all-time high $ 47.50.

Brent North Sea crude for October rose four cents to finish at $ 43.03.

The surge in prices could not be halted, even by news that Sadr had promised to disarm his militia and leave a holy shrine following a ceasefire.

"Sayyed (honorific) Moqtada Sadr has sent a message to the national conference in which he accepted all the conditions extended to him, but there must be a ceasefire for the steps to be implemented," said one of his aides, Ahmed al-Shaibani.

The news came hours after Iraq's Defence Minister had threatened to crush his rebellion.

The oil market chose instead to focus on a weekly snapshot of US commercial crude oil inventories and fears of tight supply. Crude oil inventories in the week to August 13 dropped 1.3 million barrels to 293.0 million, the Energy Department said. Gasoline stocks declined 2.6 million barrels to 205.7 million.

Distillates, mostly diesel and heating oil climbed 2.1 million barrels to 124.6 million. Diesel rose by 800,000 barrels to 74.1 million. Heating oil climbed 1.3 million barrels to 48.8 million.