Oil prices hit new highs on Tuesday as a warning from the U.S. Navy of potential al Qaeda attacks on oil tankers heightened worries about a U.S. military campaign against Iraq.

The Navy's Bahrain-based Marine Liaison Office issued the warning to shipping in the Middle East but said it had no evidence that any imminent attack was planned.

International benchmark Brent crude oil by mid-afternoon in London was trading up 43 cents at $28.92 a barrel after peaking at $29.02, its highest level since just after last year's September 11 attacks on the United States. U.S. crude gained 37 cents in New York to $30.10 a barrel, a 19-month high.

"What's worrying is the fact the Navy felt it necessary to put out this warning. It suggests they're hearing more than just chatter over the airwaves," said Nauman Barakat of brokers Fimat in London.

Traders are worried that al Qaeda might launch some form of an attack on Wednesday, the anniversary of the Sept. 11 attacks.

"There's no doubt oil markets are scared about the potential for another al Qaeda attack," said Barakat.

The Navy advisory said: "According to unconfirmed reports circulating within the regional shipping community, the al Qaeda terrorist group has planned attacks against oil tankers transiting the Arabian Gulf and Horn of Africa areas."

"While the U.S. Navy has no specific details on the timing or means of the planned attacks, and there are no indications than an attack is imminent, the threat should be regarded seriously," the statement, seen by Reuters, said.

The warning came as Britain set out the case against Iraq, which London and Washington say may face military action for developing weapons of mass destruction.

British Prime Minister Tony Blair said that Baghdad should expect "action will follow" if it ignored international demands to let United Nations weapons inspectors back into the country.

Dealers are worried about the consequences of an attack on Iraq for the oil-rich Middle East.

"It is the pan-Gulf reaction to a U.S attack on Saddam, not the loss of Iraq oil that is the issue for the market," said analyst Lawrence Eagles of GNI Research.

Earlier, Iraq's Vice-President Taha Yassin Ramadan called on Arabs to strike U.S. interests in the region if Washington launches an attack.

The market is waiting for U.S. President George W. Bush to make his case against Iraq to the United Nations on Thursday.

Brent has risen over 40 percent so far this year on growing fears of a war and Western countries say crude prices around $30 could threaten a nascent economic recovery.

OPEC KEEPS HEAT ON

OPEC, the cartel of mostly Middle Eastern oil exporters, was also keeping the heat under prices as Kuwait backed others in the group who are against releasing more supply ahead of winter.

OPEC's official supply quotas are at their lowest level in a decade after four cuts since the beginning of 2001, when demand dipped with a world economic downturn.

Kuwait said it will not support an output cut unless prices have a sustained run above the $28-a-barrel top end of OPEC's targeted price range for a basket of cartel crudes. The basket was priced at $27.59 a barrel on Monday.

The International Energy Agency, which defends energy security for the industrialised world, has said it expects OPEC to act on output following the recent price surge.

Some analysts believe major producer Saudi Arabia wants to increase production to prevent a possible supply crunch this winter.